Revision Plan Contract Law – 17 topics1. Themes & Ideas2. History

a. Classicalb. Neo Classical

3. Contemporary - Relational theory4. Formation – (COVERED FOR MOCKS)

a. Offer&Acceptanceb. Consideration&Estoppelc. Intention to create legal relations&Capacity, Privity

5. Contenta. Express Terms & Representationsb. Implied Termsc. Categorisation of termsd. Exclusion Clauses

6. Vitiating Factorsa. MisRepb. Undue Influencec. Duress

7. Discharge of Contracta. Agreementb. Performancec. Breach

Basics of Contract (Lecture 1)Unilateral: performed by/affecting 1 person/party.tBilateral: performed by/affecting both sides

Promises & AgreementsGratuitous promises (unilateral) - Promise in return for an act (bilateral) - Promise in return for a promise (bilateral)Consensus ad idem -‘the meeting of minds’: the two parties are in agreement as to the terms of

the contract.Standard Forms Some Businesses use standard terms for increased efficiency, reduces

negotiation & introduces certainty• Written in favor of the party presenting them.• Used by large corporations to deal on their terms & exclude or limit liability• Impersonal not open to negotiation• The small printSpecial Relationships - Some contracts reflect a special relationship. These are ‘different’ to routine contracts. The nature of the agreement imposes different standards on one or more of the parties. ‘The relationship is based on trust & confidence’ Rights & Powers must be exercised in ‘good faith’. Extends beyond contract into Trusts.

The historical Context of Contract Law (Lecture 2)Two views explaining the emergence of contract law1. Classical Contract Law Develops a results of the social & economic changes in the 18th

century informed by political ideas of thinkers like Adam Smith & John Locke.2. Although there are major changes in society contract law develops over a much longer

period & the beginnings can be seen much earlier. The link in 1 is overstated.Common law- emerges as court develops common approach (cases) [Common law- individualist

bargain must be upheld]Statutes- products of parliamentEquity- emerges via Lord Chancellor’s court ….. Courts merge contract & equity in 1873 [Equity- conscience & fairness]

The Changing Nature of the 18 th Century 1) The Industrial Revolution2) Shift from property to trade- Atiyah’s view point 3) Classical Economists (Smith, laissez- faire)4) New political ideas (Hobbes, Locke)5) Development of Government & the relationship to the people.

Some Theorists views on the emergence of classical contractHobbes perceived man to be selfish & presumed that the need for monarchy is simply to have safety thus establishing an individualistic approach to contractJohn Locke the relationship of the government & the people was one of a social contract in which the citizens surrender their freedom in return for safety

Adam Smith the reason for the emergence of classical contract is due to economic rationale. Man’s desire to become wealthy & happy opened gateways for contracts to be formed. This shows an individualistic approach to contract as parties enter on their own accounts & for their own purposes.Max Weber argued that’s contractual freedom is based on the economic state in which the contract is formed in. His view is that freedom of contract is far more dominant than it used to be with one party being at a bigger advantage than the other even if both parties freely entered the contract.Atiyah the rise of classical contract law was due to the consequences of the industrial revolution. He talks about the notion of ‘fairness to bargain’ it was established at the birth of classical contract that it should be done so fairly by the Chancery.Simpson believe that classical contract law existed way before the economic consequence of the Industrial Revolution & states that it existed during the Tudor period.Neo-Classical Contract (Lecture 3)New ‘free-market economy’ contracting included:

(i) Parties do not owe any ‘duty’ to each other at the outset.(ii) Parties bargain or negotiate(iii) Each party relies on his/her own judgment(iv) Agreements freely made without ‘duress’.(v) Contents are agreed between the parties(vi) Each party is bound & must ‘pay’ for failure to perform

Established what you need for a valid contract; an offer. Something capable of acceptance; Offer = clear & unambiguous. Acceptance- The offer itself must be accepted. Intention- the parties must intend it to be a valid agreement. Capacity - for example, certain limitations are placed upon parties such as minors, ‘mentally disordered’ persons etc. Consideration - ‘The price paid for the promise bought’. This is probably the most contentious & difficult area in practice

Notion of fair bargains became almost irrelevant. Previously the courts would have taken into account the fairness of the bargains, however with the new ideas from the notion of ‘free will’ bargains, the court sought that the decisions made were individualistic & so the fairness of the consideration applied became irrelevant.Attack on Freedom of Contract as there was a rise in standard form contracts. With this came the inequality of bargaining power, as there was a bigger concentration on economic power. Also there was the concept of welfarism which meant that there were different political agendas.Intervention

o Courts & Parliament are prepared to imply terms or redraw the traditional rules.

o Statutory Intervention e.g. Sale of Goods Act 1979, Unfair Contract Terms Act 1977

o Judicial Intervention: Williams v Roffey 1991 1QB 1Development of areas in Intervention so the court may be able to rescue one party from a bad

bargain• Duress /Promissory Estoppel/Mistake/MisRep/Fraud/UI /Restraint of trade Importance of Consideration as an element of an effective contract

o An essential part of the ‘agreement’.o All contracts require some considerationo the price for which the promise is boughto Demonstrates an exchange of promises rather than just evidence of an agreement.

Case LawHartley v Ponsonby 1857 119 ER 1471Lloyds Bank v Bundy 1975 3 All ER 757Nat West Bank v Morgan 1985 1 All ER 821Schroeder v Macaulay 1974 3 All E.R. 616Stilk v Myrick 1809 EWHC KB J58 Williams v Roffey 1991 1QB 1

Relational Ideas/ Relational Contract Theory (lecture 4)Discrete-relational Spectrum ^ ^Discrete RelationalDiscrete contracts = 1 off transaction, No intent to maintain future relations, Transaction completed via immediate exchange.Relational contracts ‘...Parties treat their contracts more like marriages than like one-night stands. Obligations grow out of the commitment that they’ve made to one another….they are not

frozen at the initial point of commitment, but change as circumstances change; the object of contracting is not primarily to allocate risks, but to signify a commitment to co-operate..’ (Gordon quoted in Macaulay)Parol Evidence Rule ‘Evidence cannot be admitted..to add to, vary or contradict a written instrument. In relation to contracts, the rule means that, where a contract has been reduced to writing, neither party can rely on extrinsic evidence of terms alleged to have been agreed…’ (Treitel)Avoiding the parol evidence rule, you can use the followingWritten agreement not the whole agreementImplied TermsOral warrantiesCustomRectificationCollateral Agreements

However there is a ‘GAP’ between the paper deal & the real deal as you cannot predict what the future holds:

‘the world changes & surprises us: wars break out in places where we do not expect them….OPEC drives up energy costs unexpectedly; new technologies, often involving computers change

things so that an older contract no longer makes sense’ (Macaulay 2003, 46)

If the relationship is a strong one initial terms may be viewed as unimportant. Those who negotiate may not record the deal there may be different assumptions. Negotiations may preclude incorporation of some things.How do courts deal with the ‘gap’? Implied terms – Waiver – Estoppel – Bending the rules e.g. Williams v Roffey

FORMAT DEFINITION/NOTES CASES FACTS/RELAVANCE/PRINCIPLE

OFFER In order to amount to an offer it must be shown that the offeror had the intention to be bound

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 CA Carlil bought product, followed instructions, it didn’t work, & she claimed the £100 reward. D. argued. Held she was entitled: deposit of £1,000 =intent therefore not a sales puff. Acceptance through full performance.

Offer leads to ‘binding contract’ on acceptance; an invite to treat can’t be accepted it’s an invitation for offers.o Goods on display are

generally not offers but an invitation to treat. Customer makes offer to purchase goods; trader decides whether to accept the offer

Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401 CA Self-checkout case regarding pharmaceuticals that require a pharmacist.Ccourts need to determine where the contract came to play. Goods on the shelf are an invite to treat not an offer.Fisher v Bell [1961] 1 QB 394 Flick Knife Case - on display in shop. Not an 'offer' -> an invitation to treat. Court applied the literal rule of statutory interpretation. Offering / exposing for sale in the Restriction of Offensive Weapons Act 1959 = only a true offer would be prohibited by the Act

o Adverts are invites to treat:

o EXCEPTION In some instances an advert can amount to an offer Carlill v Carbolic Smoke Ball co   [1893] 1 QB 256

Partridge v Crittenden (1968) 2 All ER 421 D. put advert in classified section of a magazine offering bramble finches for sale. S.6 of the Protection of Birds Act 1954 -> offence to offer such birds for sale. Charged & convicted, appealed against his conviction. The D’s conviction was quashed. The advert was an invitation to treat not an offer. The literal rule of statutory interpretation was applied.

o Contracts by tenders represent an invite to treat; each tender submit, amounts to an offer. If request says acceptance of lowest or highest

Spencer v Harding Law Rep. 5 C. P. 561 D. advertised sale by tender of stock in trade belonging Eilbeck & co. Ad specified goods could be viewed; time of opening for tenders & must pay in ££. No reserve. C submitted highest tender but D. refused sale. Not stated highest tender=acceptance. The ad was invite to treat, the tender was an offer, D. could choose to accept the offer or not

tender or specifies any other condition this will amount to an offer; unilateral contract, acceptance takes place on performance of the condition

Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd (1986) AC 207 D’s specification that it binds itself to accept the highest bid meant invites to submit tenders, amounts to an offer. By submitting highest bid, C accepted offer & unilateral contract was formed. Outerbridge’s referential bid deemed invalid, because other specification of the invite implied no referential bids.

o Auctions - Where an auction takes place with reserve, each bid is an offer which is then accepted by the auctioneer (Sales of Goods Act 1979 s 57). Where the auction takes place without reserve, the auctioneer makes a unilateral offer which is accepted by the placing of the highest bid

Payne v Cave (1789) 3 TR 148 Old English case, stands for the proposition that an auctioneer's request for bids is not an offer but an invitation to treat. The bidders make the offers which can be accepted by the auctioneer.British Car Auctions v Wright [1972] Invitation to treat Attempt to prosecute the British Car Auction for selling an un-roadworthy car. At an Auction there was no offer to sell the vehicle & the prosecution failed.Barry v Davies [2000] EWCA Civ 235 Offer&unilateral Contract C submitted highest & only bid at auction, without reserve. Items= two engine analysers worth £14,000. C submitted bids of £200 each. Auctioneer refused sale. C brought action; breach of contract claiming damages of £27,600. C entitled to damages. When auction is without reserve, auctioneer makes unilateral offer; accepted when submitting highest bid. Binding contract.

TERMINATE Death of Offeror or Offeree Bradbury v Morgan (1862) Judgment was given for the P., Bradbury.

Lapse of time. An offer will terminate after a reasonable lapse of time. What amounts to a reasonable period will depend on the circumstances.

Ramsgate Victoria Hotel v Montefoire (1866) LR 1 Ex 109 D. offered to purchase shares in the C’s. Company. 6 months later C. Accepted offer but in time value of shares fell. D. had not withdrawn the offer but refused to go through with the sale. C. brought an action for performance of the contract. Offer no longer open due to the nature of subject matter. Offer lapsed after a reasonable period of time. no contract & the C’s. action was unsuccessful.

Revocation (Retraction)Offeror is free to withdraw at any time before acceptance unless a deposit has been paid

Dickinson v Dodds (1876) 2 Ch D 463 D. offers to sell house to C. promised to keep offer open till Friday. Thursday D. accepts offer from 3 rd party for house. D asked a friend to tell the C. offer was withdrawn. C went round to the D’s house Friday morning claiming to ac cept the offer. C brought action seeking performance. Offer revoked. No contract existed between parties. No obligation to keep the offer open until Friday since C had provided any consideration in exchange for the promise.Errington v Errington Woods [1952] 1 KB 290 CA Father-in-law purchased house for son/daughter-in-law. House was put in the father's name paying deposit as a wedding gift & promised the couple if they paid the mortgage instalments=transfer house to them. Father ill & died. Mother inherits house. After death son lived with mother but the wife refused & continued to pay instalments. Mother brought action to remove the wife from the house. Wife entitled to remain in the house. The father had made the couple a unilateral offer . The wife was in course of performing the acceptance of the offer by continuing to meet the mortgage payments.

Counter OfferAn offeree responds to an offer by making an offer on different terms.

Hyde v Wrench (1840) 49 ER 132 Chancery Division D. offered to sell farm to C. for £1,000. C. offered £950, D. refused. C. tried to accept original offer of £1,000. D refused to sell to C & C brought action for specific performance.

There was no contract. Where counter offer is made it destroys the original offer so that it is no longer open to the offeree to accept.

ACCEPTANCE CommunicationThe general rule is that the offeror must receive the acceptance before it is effective:

Entorres v Miles Far East [1955] 2 QB 327 CA C. sent telex message from England offering to purchase 100 tons of Cathodes from D. in Holland. D. sent back a telex from Holland to London accepting. Question for court was at what point did contract came into existence. If acceptance was effective from the time telex was sent the contract was made in Holland & Dutch law would apply. If acceptance took place when the telex was received in London then the contract would be governed by English law. To amount to an effective acceptance/acceptance needed to be communicated to the Offeree. Therefore the contract was made in England.Felthouse v Bindley [1862] EWHC CP J35 Court of Common Pleas SILENCENephew discussed buying horse from uncle offering to purchase horse & said “if I don't hear from you by the weekend I will consider him mine”. Horse was sold by mistake at auction. Auctioneer had been asked not to sell the horse but forgot. Uncle commenced proceedings against auctioneer for conversion. Action depended upon whether a valid contract existed between the nephew & the uncle. There was no contract. You cannot have silence as acceptance.Brogden v Metropolitan Railway (1877) 2 App. Cas. 666 PERFORMANCE C. (supplier of coal to D.’s railway company) dealt for some years on informal basis with no written contract. Parties agreed it’s wise having formal contract written. D. drew up a draft contract & sent to C.. C made some amendments & filled some blanks & sent it back to the D. The D. filed document but never communicated their acceptance. Throughout this period C’s. Continued to supply the coal. A dispute arose & it was questioned whether in fact the written agreement was valid. The written contract was valid despite no communication of the acceptance. The acceptance took place by performing the contract without any objection as to the terms.Butler Machine Tool v Ex-Cell-O Corporation [1979] 1 WLR 401 CA LAST SHOT” DOCTRINE - TERMS OF LAST DOCUMENT PREVAIL.S

The Postal Rule agreed that parties will post as a means of communication rule will apply. The postal rule states that where a letter is properly addressed & stamped the acceptance takes place when the letter is placed in the post box

Adams v Lindsell (1818) 106 ER 250 D wrote to C offering sale of wool & asking for reply 'in the course of post'. Letter delayed in post. On receiving letter C posted letter of acceptance the same day. Due to delay D’s assumed C not interested in the wool & sold it to a 3rd party. C sued for breach of contract. V alid contract which came in to existence the moment the letter of acceptance was placed in the post box. T his case established the postal rule. Applies where post is agreed form of communication between parties & the letter of acceptance is correctly addressed & carries the right postage stamp. The acceptance then becomes effective when the letter is posted.Holwell Securities v Hughes [1974] 1 WLR 155 D granted C option to purchase his house (£45,000). Option was to be exercisable 'by notice in writing' within 6 months. 5 days before expiry, C posted a letter exercising the option. This letter never received by D. C sought to enforce option relying on the postal rule stating the acceptance took place before the expiry of the option. By requiring 'notice in writing', D

had specified that he had to actually receive the communication & had therefore excluded the postal rule.Postal LOSS/STRIKE Household fire insurance co v grant D applied for shares in Household Fire & Carriage Accident Insurance Company. Company allotted the shares to D, & suitably addressed to him, posting letter containing notice of shares. Letter was lost in post he never received acceptance. Later the company went bankrupt, & asked D for the outstanding payments on the shares, which he refused saying there was no binding contract. Liquidator sued. The question was whether D offer for shares had been validly accepted, & was he legally bound to pay?

Terms of Acceptance must be same as term of offer terms differ amounts to offer - no contract will exist

Hyde v Wrench (1840) 49 ER 132 Chancery Division (Decided by Lord Langdale MR) no contract. Where counter offer is made it destroys the original offer so that it is no longer open to the offeree to accept.

The agreement must be certainWhen viewed objectively it must be possible to determine exactly what the parties have agreed to. Compare the following two cases

Scammell & Nephew v Ouston [1941] AC 251 HL parties entered agreement, C were to supply a van for £286 on HP terms over 2 years & D was to trade in his old van for £100. There was disagreement & C refused to supply van. No certainty as to the terms of the agreement. Whilst there was agreement on price there’s nothing in relation to the HP terms stating whether it would be weekly or monthly instalments or how much the instalments would be.Sudbrook Trading Estate v Eggleton [1983] AC AC 444 HL lease gave tenant an option to purchase freehold of property at a price to be agreed by two surveyors 1 appointed by tenant/1 appointed by landlord. Tenant sought to exercise option but landlord refused to appoint a surveyor. Landlord claimed clause was vague to be enforceable as it didn’t specify a price. Clause wasn’t too vague to be enforceable as there’s a mechanism to ascertain the price.

CONSIDERATIONBargain of contract; based on exchange of promises. Each party must be promisor/promise. Each receives a benefit/suffers a loss. This benefit or loss is referred to as   considerati on .

Consideration must be something of value in the eyes of the law - (Thomas v Thomas) (1842) 2 QB 851. one sided promise not supported by consideration=a gift. Law doesn’t enforce gifts unless made by deed. Common law obeys requirement of Consideration (sometimes courts go to lengths to invent consideration eg Ward v Byham [1956] 1 WLR 496, Williams v Roffey Bros [1990] 2 WLR 1153)equity will, in some instances, uphold promises which are not supported by consideration through the doctrine of promissory estoppel .

MUST NOT BE PAST Re McArdle (1915) Ch 669 CA D carried out improvements/repairs on a bungalow. Bungalow formed part of the estate of her husband's father who died leaving the property to his wife for life then on trust for McArdle’s husband/four siblings. After the work had been carried out brothers & sisters signed a document stating in consideration of you carrying out the repairs we agree that the executors pay you £480 from the proceeds of sale. However, the payment was never made. Promise to make payment came after the consideration had been performed therefore the promise to make payment was not binding. Past consideration is not valid.Past consideration may be valid where it was preceded by a request: Lampleigh v Braithwaite [1615] EWHC KB J17 D killed a man & was due to be hung for murder. He asked C to do everything in his power to obtain a pardon from the King. C went to great efforts & managed to get the pardon requested. D then promised to pay him £100 for his efforts but never paid up. Whilst the promise to make payment came after the performance & was thus past consideration, the consideration was proceeded by a request from D which meant the consideration was valid. D. was obliged to pay C £100.must be sufficient; need not be adequate Chappel v

Nestle [1960] AC 87 HLWrappers did form part of the consideration as the object was to increase sales & therefore provided value. The fact that the wrappers were simply to be thrown away did not detract from this. Chappel were granted the injunction & Nestle could not sell the records as they had not complied with the notice requirements under s.8.must move from the promisee Tweddle v Atkinson [1861] EWHC QB J57 QBCouple were getting married; father of bride entered agreement with father of groom that they’d each pay the couple a sum of money. The father of the bride died without having paid. The father of the son also died so was unable to sue on the agreement. The groom made a claim against the executor of the will. The claim failed: groom was not party to agreement & consideration did not move from him. Therefore he’s not entitled to enforce the contractAn existing public duty will not amount to valid consideration Collins v Godefrey (1831) 1 B & Ad 950 KB C.=Collins was subpoenaed to court as a witness in separate court case involving the D.= Godefrey. He had sued his attorney for malpractice & Collins was required by the court to attend as an expert witness. Collins never gave evidence but was required to standby for 6 days in case. After trial Collins gave Godefrey invoice to cover his time spent at court & demanded payment by the next day. Without giving him the full day to pay, Collins commenced an action to enforce payment. Collins was under a public duty to attend court due to the subpoena. Where there exists an existing public duty this can’t be used as consideration for a new promise. Godefrey was not required to pay him.EXCEPTION Unless it goes beyond their duty . Glasbrook Bros v Glamorgan County Council [1925] AC 270 HL D. owners of colliery asked the police to provide protection during a miner's strike. Police provided protection as requested & provided man power as directed by D. although they disputed the level of protection required to keep peace. End of the strike the police submitted invoice to cover extra costs of providing protection. D. refused to pay arguing police under an existing public duty to provide protection & keep peace. Providing additional officers to that required, the police had gone beyond their duty. They were therefore entitled to paymentAn existing contractual duty will not amount to valid consideration Stilk v Myrick [1809] EWHC KB J58 King's Bench Division C. was a seaman on route London to the Baltic & back. He was to be paid £5 per month. During the voyage 2 of 12 crew left. Captain promised remaining crew that if they worked ship undermanned back to London he’d divide wages due to the deserters between them. C. agreed. Captain never made extra payment promised. C. was under existing duty to work ship back to London & undertook to submit to all the emergencies that entailed. He hadn’t provided consideration for the promise of extra money. Entitled to nothing.EXCEPTIONS Unless the party goes beyond their existing duty Hartley v Ponsonby [1857] 7 EB 872 Half of a ship's crew deserted on a voyage. The captain promised the

remaining crew members extra money if they worked the ship & completed the voyage. The captain then refused to pay up. crew entitled to extra payment promised on grounds that they had gone beyond existing contractual duty or the voyage had become too dangerous frustrating original contract & leaving crew free to negotiate a new contract.or if they confer a practical advantage: Williams v Roffey Bros [1990] 2 WLR 1153 The D.’s= building contractors who entered agreement with Shepherds Bush Housing Association to refurbish block of 27 flats. Contract subject to a liquidated damages clause if they did not complete the contract on time. D engaged C to do the carpentry work for an agreed price of £20,000. 6 months after commencing the work, C realised he had priced the job too low & would be unable to complete at originally agreed price. He approached the D who had recognised that the price was particularly low & was concerned about completing contract on time. D agreed to pay C an additional £575 per flat. C continued work on the flats for a further 6 weeks but only received additional £500. C ran out of money & refused to continue unless payment was made. The D engaged another carpenter to complete the contract & refused to pay C the further sums promised arguing C had not provided consideration as he was already under an existing contractual duty to complete the work. Consideration was provided by C conferring a benefit on D by helping them to avoid the penalty clause. Therefore the D was liable to make the extra payments promised.If the existing contractual duty is owed to a 3rd party this may be used as valid consideration for a new promise: Scotson v Pegg [1861] EWHC Exch J2 Purchaser of coal paid the D to carry & to unload coal. C was the supplier of the coal who had also paid the D to carry & unload coal. C brought an action to recover the money paid arguing the D was already under an existing duty to carry & unload the coal & thus provided no consideration. An existing contractual duty owed to a 3rd party to the contract amounts to valid consideration for new promise. Consequently C could not recover the sums paid & the D was entitled to get paid twice for doing the same thing.Part payment of a Debt Part payment of a debt is not valid consideration for a promise to release the debt in full Pinnel's Case 1602 5 Rep, 117  Court of Common Pleas C was owed £8 10 shillings. D paid £5 2 shillings & 2p. C sued for amount outstanding. C entitled to full amount even if agreed to accept less. Part payment of debt isn’t valid consideration for a promise to forebear the balance unless at the promisor's request part payment is made either:a) before the due date orb) with a chattel orc) to a different destinationexceptions to rule in Pinnel's case: Hirachand Punamchand v Temple [1911] 2 KB 330 CA C= money lenders in India. Lent money to D Lieutenant Temple who was army officer serving in India. C sought money from D but unable to get response, they contacted his father. Talk occurred between C & father's solicitors. C asked how much the father would be prepared to pay to settle son's accounts. Amount agreed which was

substantial amount though not full amount. C promised to send promissory note relating to the son's debt to the father when payment received. Father paid, but C retained promissory note / sued son to enforce balance. Payment made by father = sufficient to discharge balance. Where person making payment in return for discharging the debt owed by another this will amount to good consideration as the existing duty to make payment was not owed by them but a third party

ESTOPPEL Promissory estoppel- an equitable doctrine which can stop a person going back on a promise which isn’t supported by consideration; developed by an obiter statement by Denning in Central London Property Trust Ltd v High Trees Ltd [1947] KB 130 basing the doctrine on the decision in Hughes v Metropolitan Railway (1876-77) L.R. 2 App. Cas. 439 . The HL affirmed existence of promissory estoppel in contract law in Tool Metal Manufacturing v Tungsten [1955] 1 WLR 761

Requirements: pre-existing contract or legal obligation which is then modified. There must be a clear/unambiguous promise. Change of position. It must be inequitable to allow the promisor to go back on their promise

Pre-existing contract/legal obligation -> modified Combe v Combe [1951] 2 KB 215 CA Husband promised to make maintenance payments to his estranged wife but failed. Wife brought an action to enforce the promise invoking promissory estoppel. Action failed. There was no pre-existing agreement which was later modified by a promise. Wife sought to use promissory estoppel as sword & not a shield.There must be a clear an unambiguous promise Woodhouse A.C. Israel Cocoa Ltd v Nigerian Product Marketing Co Ltd [1972] AC 741 A contract for the sale of some coffee beans was agreed to be payable in pound sterling. The sellers mistakenly sent invoice stating price was payable in Kenyan Shillings. At the time the value of pound sterling & Kenyan shillings was equal. The buyers accepted the delivery & invoice without objection. Subsequently the value of pound fell dramatically in relation to Kenyan shillings. Buyers sought to revert to pound sterling as stated in the contract. The buyers conduct in accepting the invoice unquestionably amounted to an implied clear& unambiguous promise to accept on those terms.Change of position Alan v El Nasr [1972] 2 WLR 800 By contract, sellers agreed to sell 250 tons of coffee beans at 262 Kenyan shillings per cwt to El Nasr payable on credit. At the time of the contract the value of Kenyan shillings & pound sterling were of equal value. Whilst the contract specified the price payable in Kenyan shillings, the credit account referred payment in pound sterling. There were a number of other discrepancies between credit agreement & contract such as date of shipping & the quantity to be shipped these were rectified in revised agreement however, new agreement still referred to payment in pound sterling. Sellers accepted the first instalment of 57K in pound sterling without objection, however, the value of the pound dropped dramatically resulting in loss of 165,530.45 shillings. Sellers then sought to revert to Kenyan shillings & demanded further payment. Buyers raised promissory estoppel in defence; in accepting the instalment in pound sterling & redrafting the credit agreement without changing the currency there was an implied promise that they’d not revert to Kenyan Shillings. The sellers argued the buyers hadn’t acted to their detriment in reliance of this promise as they’d gained a benefit Detrimental reliance=not a requirement of promissory estoppel. It only needs to be established that the promisor has changed their position.It must be inequitable to allow the promisor to go back on their promise D & C Builders v Rees [1966] 2 WLR 28 CA D instructed C to do building work at his home to the value of £746. D paid £250 on account & C reduced the bill by £14 & there was a sum owing of £482. C wrote to D several times

pressing payment but unsuccessful; there had been no complaints as to the workmanship at this time. C at the time was in financial need & the business was verging bankruptcy a fact D was aware of. C telephoned the home & D answered & said she would give them £300 in satisfaction of the whole debt. C refused & said he would take the £300 & give her a year to clear the balance. He called at the house to collect the money but D remained firm that she would only pay £300 & demanded that C wrote on the receipt 'in completion of the account' otherwise she’d pay nothing. C needed the money immediately so reluctantly agreed to write this but stated he fully intended to pursue the balance as the money paid did not cover the costs he had incurred. He brought an action to recover the balance. D sought to rely on estoppel relying on the written receipt as demonstrating a promise to accept the lesser sum. C’s were successful. D could not rely on estoppel as there was no true agreement to accept less & because D had taken advantage of the builder's position & mislead them as to her financial position.

INTENT TO CREAT LEGAL RELATIONSHIP

Intent to create legal relations is aimed at sifting cases that aren’t appropriate for court. Not every agreement = binding contract which can be enforced through courts. Eg agreement to meet a friend at pub. Moral duty, not a legal duty.. In order to determine which agreements are legally binding & have an intention to create legal relations, law draws distinction between social/domestic agreements & agreements made in a commercial context.

Intention to create legal relations in social & domestic agreements In social & domestic agreements the law raises a presumption that the parties do not intend to create legal relations: Jones v Padavatton [1969] 1 WLR 328 CA mother promised to pay daughter $200 per month if she gave up her job in US & went to London to study the bar. Daughter was reluctant at first, she had a well-paid job with Indian embassy in Washington & was happy & settled however her mother persuaded her that it’d be in her interest go. The mother's idea was that the daughter could join her in Trinidad as a lawyer. Initial agreement wasn't working out as the daughter believed the $200 was US whereas the mother meant Trinidad dollars which was less than half what was expected. This meant the daughter could only afford to rent 1 room for her & her son to live in. Mother then agreed to purchase a house for the daughter to live in. She purchased a large house so the daughter could rent out other rooms & use the income as maintenance. The daughter married & did not complete her studies. The mother sought possession of the house. Question for the court was whether there existed a legally binding agreement between the mother & daughter or whether the agreement was merely a family agreement not intended to be binding. The agreement was purely a domestic agreement which raises a presumption that the parties do not intend to be legally bound by the agreement. There was no evidence to rebut this presumption.

This presumption may be rebutted by evidence to the contrary. This evidence may consist of:A written agreement: Errington v Errington Woods [1952] 1 KB 290Where the parties have separated: Merritt v Merritt [1970] 1 WLR 1211Where there’s 3rd party to agreement: Simpkins v Pays [1955] 1 WLR 975Intention to create legal relations in commercial agreements Where an agreement is made in a commercial context, the law raises a presumption that the parties do intend to create legal relations by the agreement: Esso Petroleum v Customs & Excise [1976] 1 WLR 1 HL Esso ran a

promotion whereby any person purchasing four gallons of petrol would get a free coin from their World Cup Coins Collection. The question for the court was whether these coins were 'produced in quantity for general resale' if so they would be subject to tax & Esso would be liable to pay £200,000. Esso argued that the coins were simply a free gift & the promotion was not intended to have legal effect & also that there was no resale. There was an intention to create legal relations. The coins were offered in a commercial context which raised a presumption that they did intend to be bound. However, the coins were not exchanged for a money consideration & therefore the coins were not for resale.

Again this presumption can be rebutted by evidence to the contrary-Binding in honour only clauses: Jones v Vernon Pools (1938) C claimed to have won the football pools. The coupon stated that the transaction was "binding in honour only". It was held that C was not entitled to recover because agreement was based on honour of the parties (and thus not legally binding). (DECISION BOUND Ferrera v Littlewoods Pools [1998] EWCA Civ 618 CA)

CAPACITTY MinorsContracts For Necessaries Sale of Goods Act

1979 s.3(3) defines necessaries as: ‘goods suitable to the condition of life of the minor & to his actual requirements at the time of sale & delivery

Minor’s Benefit (Minors Contract Act 1987)Contracts of employment.

Nash v Inman C entered into a contract to supply D (a Cambridge undergraduate student) with, amongst other things, 11 waistcoats.  D was a minor who was already adequately supplied with clothes by his father. When C claimed the cost of these clothes D sought to rely on lack of capacity & succeeded at first instance. C was unsuccessful; he couldn’t show the minor was adequately supplied with clothes.

Clements v London & NW Railway Co-contract young railway porter agreed to join an insurance scheme & to forgo any claims he might have under the Employers' Liability Act. He had forfeited his rights under the Act, the contract as a whole being for his benefit. It was held that the contract was for the minor's benefit & that he should be able to obtain employment which wou1d be difficult if he could not make a binding contract

De Francesco v Barnum 14 yr old girl apprenticed for 7 years to learn stage dancing. Terms restrained her from several acts eg not being maintained by Barnum; not able to accept other work & being deemed to have resigned if wishing to marry. beneficial contracts of service require that the beneficial terms outweigh the onerous terms. In this case they did not - the restrictions on her were too harsh so the contract was not considered binding.

Mental Incapacity Section 7 of the Mental Capacity Act 2005

Drunken persons Section 3 of the Sale of Goods Act 1979

Individuals will be bound by their contracts unless: disordered or drunk that they did not understand the

nature of what they were doing The other party was aware of this

PRIVITY2 rules – 1st that

consideration must move from the promisee

Tweddle v Atkinson 1861The fathers of a husband & wife agreed in writing that both should pay money to the husband,

a 3rd party may not have obligations imposed by terms of a contract, & 2nd, that a 3rd party may not benefit from terms of a contract.

adding that the husband should have the power to sue them for the respective sums. The husband's claim against his wife's fathers' estate was dismissed, the court justifying the decision largely because no consideration moved from the husband.

Only a promisee may enforce the promise meaning if 3rd party is not a promisee he’s not privy to contract.

Dunlop Tyre Co v Selfridge [1915] AC 847C sold tyres to Dew & Co, wholesale distributors, on terms that Dew would obtain an undertaking from retailers that they shouldn’t sell below C list price. Dew sold some of the tyres to the D, who retailed them below list price. C sought injunction & damages. The action failed because although there was a contract between D & Dew, C were not a party to it & "only a person who is a party to a contract can sue on it," (per Lord Haldane).

EXCEPTIONSCOLLATERAL CONTRACT

Shanklin Pier Ltd v Detel Products Ltd[1951] 2 KB 854 Shanklin Pier Ltd hired a contractor to paint Shanklin Pier. They spoke to Detel Products Ltd about whether a particular paint was suitable to be used, & Detel assured them that it was, & that it would last for at least seven years.[1] On the basis of this conversation Shanklin Pier Ltd instructed the contractors to use a particular paint, which they did. The paint started to peel after three months, & Shanklin Pier attempted to claim compensation from Detel Products A collateral contract existed. Shanklin Could not sue for the contract for sale of paint.

CONTENT DEFINITION/NOTES CASES FACTS/RELAVANCE/PRINCIPLES

Contents of a contract are known as terms or clauses. Contract terms may be express or implied & they may be classed as; conditions, warranties or innominate terms.

EXPRESS TERMS – those agreed between parties themselves

1. An express term - if not fulfilled the innocent party may bring an action for breach of contract. 2. A representation - if not fulfilled the innocent party may bring an action for MisRep.3. As part of a collateral contract - the innocent party may sue on the collateral contract. The main contract remains intact:4. A sales puff - not intended to be binding. Has no legal effect. eg Red Ball gives you wings. N/A

Esso Petroleum v Mardon [1976] QB 801 CA D entered tenancy agreement with C in respect of a new Petrol station. C’s experts estimated the petrol station would sell 200k gallons of petrol. Estimate was based on figures prepared prior to planning application. Planning permission changed the prominence of the petrol station which would have an adverse effect on the sales rate. C made no amendments to the estimate. The rent under the tenancy was also based on the erroneous estimate. Consequently it became impossible for D to run the petrol station profitably. In fact, despite his best endeavours the petrol station only sold 78,000 gallons in the first year & made a loss of £5,800. The CA held that there was no action for MisRep as the statement was an estimate of future sales rather than a statement of fact. However, C was entitled to damages based on either negligent misstatement at common law or breach of warranty of a collateral contract .

1. The parole evidence rule: where contract is in writing only the terms included in the written document are terms any verbal statements will be representations

2. Relative expertise: If the representor has the greater knowledge, it is more likely to

Oscar Chess Ltd v Williams [1957] 1 WLR 370 CA D purchased second hand Morris car on basis it was a 1948 model. The registration document stated it was first

be a contractual term. Conversely if the representee has the greater knowledge it is more likely to be a representation:

registered in 1948. The following year her son used the car as a trade in for a brand new Hillman Minx which he was purchasing from C. The son stated car was a 1948 model & on that basis C offered £290 off the purchase price of the D. Without this discount D wouldn’t have been able to go through with the purchase. 8 months later C found the car was in fact a 1939 model & worth less. They brought action for breach of contract arguing the date of the vehicle was a fundamental term of the contract thus giving grounds to repudiate the contract & claim damages. The statement relating to the age of the car was not a term but a representation. The representee, Oscar Chess ltd as a car dealer, had the greater knowledge & would be in a better position to know the age of the manufacture than D.Dick Bentley Productions v Harold Smith Motors [1965] 1 WLR 623 CA C knew the D, who was a car trader specialising in the prestige market, for some time. C asked D to look out for a well vetted Bentley car. D obtained a Bentley & recommended it to C. D told him the car had been owned by German Baron & had been fitted with replacement engine & gearbox & only done 20k miles since replacement. C Purchased the car but it developed faults. D had done some work under the warranty but then more faults developed. It transpired the car did 100k miles since the refit. The question for the court was whether the statement amounted to a term in which case damages would payable for breach of contract, or whether the statement was a representation, in which case no damages would be payable since it was an innocent MisRep & C has also lost his right to rescind due to lapse of time. The statement was a term. The D as a car dealer had greater expertise & C relied upon that expertise

3. The importance of the statement & reliance: Where the representee indicates to the representor the importance of the statement, this is likely to be held to be a term:

Bannerman v White (1861) 10 CBNS 844 C agreed by contract to purchase some hops to be used for making beer. He asked the seller if the hops had been treated with sulphur & told him if they had he wouldn't buy them as he would not be able to use them for making beer if they had. The seller assured him that the hops had not been treated with sulphur. In fact they had been treated with sulphur. The statement that the hops had not been treated with sulphur was a term of the contract rather than a representation as C had communicated the importance of the term & relied on the statement. His action for breach of contract was successful.

4. Timing The longer the time lapse between making the statement & entering the contract the more likely it will be a representation

Routledge v Mackay [1954] 1 WLR 615 CA C acquired a Douglas BSA motorcycle & sidecar by exchanging another motorcycle & paying £30. The registration documents stated that it was a 1942 model & this is what the D stated the year of the motorcycle to be when C came to look at it. The motorcycle was in fact a 1936 model but had been modified & re-registered by a previous owner. The purchaser went away to think about it & then returned a few days later a written agreement was produced to the effect of the exchange which ended with the words "It is understood that when the £30 is paid over that this transaction is closed". Statement was representation & not contractual term. Registration document was not prima facie evidence of a contractual term. Neither party was expert, & there was a lapse of time between the making of the

statement & entering the contract giving C the opportunity to check the statement. Furthermore there was no mention of the date in the written agreement & the words of the agreement stating the transaction is considered closed excluded any possible collateral warranty.

IMPLIED TERMSNot expressly stated, but courts are willing, or required by statute to imply.”

Statutory implied terms - The Sale of Goods Act 1979 & the Supply of Goods & Services Act 1982Terms implied by common law

Implied   through custom (particular term is prevalent in a trade the courts may imply a term in a contract of the same type in that trade)

Hutton v Warren [1836] EWHC Exch J61 C was a farmer who had a tenancy on the D fields. C had planted corn & Barley on the fields & worked the fields to ensure the crops would grow. Before the field was due to be harvested the tenancy was terminated. C then submitted a bill to the D for the work & cost of seed spent on the field as was customary in farming tenancies. D refused to pay stating there was nothing in the tenancy agreement stating that such compensation was payable. The court implied a term into the tenancy providing for compensation for the work & expenses undertaken in growing the crops. The term was implied as it was common practice for farming tenancies to contain such a clause.

Terms implied in fact1) The business efficacy

test:This asks whether the term was necessary to give the contract business efficacy ie would the contract make business sense without it? - The courts will only imply a term where it is necessary to do so.

The Moorcock (1889) 14 PD 64   C tied his ship at the D wharf on Thames. Thames is a tidal river & at times when the tide went out the ship would come into contact with river bed. Ship became damaged due to uneven surfaces & rocks on the river bed. C sought to claim damages from the D & the D argued that there was no provision in the contract warranting the condition of the river bed. The court implied a term in fact, that the river bed would be safe for mooring. The court introduced the business efficacy test ie the term must be necessary to give the contract business effect. If the contract makes business sense without the term, the courts will not imply a term.

2) The officious bystander test:

Had an officious bystander been present at the time the contract was made & had suggested that such a term should be included, it must be obvious that both parties would have agreed to it.

Shirlaw v Southern Foundries [1939] 2 KB 20 C had been employed as a managing director of Southern Foundries the office of employment was to last for 10 years. Federated Foundries then purchased controlling share in the company & altered the company's Articles of Association giving them power to remove directors. They then dismissed C as a director who brought an action for wrongful dismissal. There was no breach of contract for his dismissal based on the employment contract as they had not dismissed him from being a managing director but only as a director. However, if he was not a director he was not able to be a managing director. C asked the court to imply a term the D would not act in a way making it incapable for him to perform his contract. CA applied the officious bystander test & did imply the term.The officious bystander test: If a third party was with the parties at the time the contract was made & had they suggested the term should be implied it would be obvious that both parties would reply with a hearty 'oh of course'. It must be obvious that both parties would agree to the term at the time the contract was made.

Terms implied at lawThe courts may imply a term in law in contracts of a

Liverpool City Council v Irwin   [1977] AC 239 Liverpool council owned a block of flats in which the D was a tenant. The common parts of the flats, the lifts, stair cases, rubbish chutes

defined type eg Landlord/tenant, retailer/customer where the law generally offers some protection to the weaker party

etc, had fallen into disrepair. A rent strike was implemented by many of the tenants including the D. The council sought to evict the D for non-payment of rent & she counter claimed for breach of an obligation to repair. However, the tenancy agreement did not mention any obligation to repair. In fact the tenancy agreement only imposed obligations on the tenant with no mention of the obligations of the landlord. The D asked the court to imply a term that the council had an obligation to repair the common parts of the block of flats. Courts did imply a term. The term arose as a legal incident in contracts of a defined type between landlord & tenant that the landlord was to take reasonable care to maintain the common parts. However, there was no breach of this duty

In addition to being a contract of a defined type, the term must be a reasonable one to include:

Wilson v Best Travel [1993] 1 All ER 353 C injured when he fell through glass patio doors whilst on holiday in Greece. The glass conformed to Greek safety standards but not to British safety standards. C brought an action against the travel agent asking for a term to be implied as a matter of law, that all accommodation offered by the D should conform to British standards. Courts did not imply a term. Whilst this was a contract of a defined type, it was reasonable for the travel agency to ensure that all accommodation offered, no matter where in the world, conformed to British safety standards.

CATEGORISEConditions, warranties & innominate termsTraditionally, contractual terms=conditions or warranties. The category of innominate terms was created in Hong Kong Fir Shipping; important for parties to identify which terms=conditions & which are warranties.  Breach of contract = it is important to determine which type of term has been breached in order to establish the remedy available.

Conditions Major term of the contract which goes to the root of the contract. If a condition is breached the innocent party is entitled to repudiate (end) the contract & claim damages:

Poussard v Spiers (1876)1 QBD 410 Madame Poussard entered a contract to perform as an opera singer for three months. She became ill five days before the opening night & was not able to perform the first four nights. Spiers then replaced her with another opera singer. Madame Poussard breached condition & Spiers were entitled to end the contract. She missed the opening night which was the most important performance as all the critics & publicity would be based on this night.

Warranties Minor terms of contract which aren’t central to existence of contract. If a warranty is breached the innocent party may claim damages but can’t end the contract:

Bettini v Gye (1876) QBD 183 Bettini agreed to perform as an opera singer for a three month period. He became ill & missed 6 days of rehearsals. The employer sacked him & replaced him with another opera singer. Bettini was in breach of warranty & therefore the employer was not entitled to end the contract. Missing the rehearsals did not go to the root of the contract.

Innominate terms Established in the case of Hong Kong Fir Shipping. Rather than classifying the terms themselves as conditions or warranties, the innominate term approach looks to the effect of the breach & questions whether the innocent party to the breach was deprived of substantially the whole benefit of the contract. Only where the innocent party was substantially deprived of the whole benefit, will they be able to treat the contract as at an end

Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26 CA A ship was chartered to the D for a 2 year period. Agreement included a term that the ship would be seaworthy throughout the period of hire. Problems developed with ship engine & the engine crew were incompetent. Consequently the ship was out of service for a 5 week period & then a further 15 week period. D treated this as a breach of condition & ended the contract. The Cs brought an action for wrongful repudiation arguing the term relating to seaworthiness was not a condition of the contract. D’s were liable for wrongful repudiation. Court introduced the innominate term approach. Rather than seeking to classify the term itself as a condition or warranty, the court should look to the effect of the breach & ask if the breach has substantially deprived the innocent party of the whole benefit of the contract. Only where this is answered affirmatively is it to be a breach of condition. 20 weeks out of a 2 year contract period did

not substantially deprive the D of whole benefit & therefore they were not entitled to repudiate the contractSchuler v Wickman Tools [1974] AC 235 HL C=manufacturers of tools & D=sales company granted the sole right to sell certain tools manufactured by C. Term of contract between parties was described as being a condition & provided that D would send a sales person to each named company once a week to solicit sales. This imposed an obligation to make 1,400 visits in total. D failed to make some of the visits & C terminated the contract for breach of condition. Despite the fact the contract had expressly stated the term was a condition, the HL held that it was only a warranty.Lombard North Central v Butterworth [1987] QB 527 D leased a computer from the C. C was to pay £584 by 20 instalments every 3 months. A term of the lease agreement provided that punctual payment was required & breach of this term would entitle the lessor to terminate the agreement. The D got into arrears with the instalments & C took possession of the computer & sold it on for £175. C sued the D claiming arrears & all future payments amounting to £6,869 in total. The term relating to prompt payment was a condition. The parties by their agreement had demonstrated that prompt payment was an essential term & the consequence of breach was clearly set out. Nicholls LJ stated that even one late payment would entitle the lessor to terminate irrespective of the effect of the breach.

NEED FOR COMMERCIAL CERTAINTY

Bunge Corporation v Tradax [1981] 1 WLR 711 HLA contract for the sale 5,000 tons of soya beans required the buyers to give the sellers 15 days’ notice of readiness of loading. This term was stated as a condition. The buyers gave a shorter notice period & the sellers treated this as terminating the contract & claimed damages. The price of soya beans had dropped by over $60 per ton. The initial hearing was decide by arbitration where it was held that the sellers were entitled to end the contract & awarded $317.500 representing the decrease in value of the soya beans. The buyers appealed to the High court who reversed this decision applying the innominate term approach from Hong Kong Fir. CA reversed the decision & the buyers appealed to the HL. The term was stated as a condition & should be treated as such. The need for certainty in commercial contracts & the fact that the innominate term approach had caused much litigation meant that it should only be used where it was impossible to classify the term as a condition or warranty by reference to the term itself.

EXEMPTION/EXCLUSION CLAUSES excludes liability or limits liability Limitation clause = Limits liability (more favourable – courts

Incorporation – clause amounts to a term of contractWorking through either:a. Signatureb. Noticec. Course of Dealing

SIGNATUREOnce signed = BOUND!! (courts are strict)

L’Estrange v Graucob (1934) C purchased cigarette vending machine for cafe. She signed order form stating in small print 'Any express or implied, condition, statement of warranty, statutory or otherwise is expressly excluded'. Vending machine didn’t work & C sought to reject it under the Sale of Goods Act for not being of merchantable quality. In signing the order form she was bound by all the terms contained in the form irrespective of whether she had read the form or not. Consequently her claim was unsuccessful.Curtis v Chemical Dry Cleaning (1951) C took wedding dress

understand business need to limit liability, if businesses didn’t limit liability they would be initially screwed.

to cleaners. She was asked to sign a form. She asked the assistant what she was signing & assistant told her it excluded liability for damage to beads. Form in fact contained clause excluding all liability for all damage howsoever caused. Dress returned badly stained. Assistant had MisRep the effect of the clause & thus could not rely on the clause in the form even though C had signed it.

NOTICETiming=CRUTIALTerm must be brought to the attention of a party at the time of contracting or prior – anything post contractual would be ineffective

HOWEVER, because of UCTA 1977 – this would be invalid because you cannot exclude liability for death or personal injury

Olley v Marlborough Court [1949] 1 KB 532 C booked into a hotel. In the hotel room on the back of the door a notice sought to exclude liability of the hotel proprietors for any lost, stolen or damaged property. C had her fur coat stolen. The notice was ineffective. The contract had already been made by the time C had seen the notice. It did not therefore form part of the contract.Thornton v Shoe Lane Parking [1971] 2 WLR 585 CA C was injured in a car park partly due to the D negligence. C was given a ticket on entering the car park after putting money into a machine. The ticket stated the contract of parking was subject to terms & conditions which were displayed on the inside of the car park. One of the terms excluded liability for personal injuries arising through negligence. The question for the court was whether the term was incorporated into the contract ie had the D brought it to the attention of C before or at the time the contract was made. This question depended upon where the offer & acceptance took place in relation to the machine. The machine itself constituted the offer. The acceptance was by putting the money into the machine. The ticket was dispensed after the acceptance took place & therefore the clause was not incorporated into the contract.

Receipts/ticketsTicket showed only a proof of purchase so courts did not include exclusion causes here.

a. TYPE OF DOCUMENT IS IMPORTANT!!!

Chapelton v Barry UDC (1940) DECK CHAIR HIRE CASE - pile of chairs & a nearby notice stating "hire of chairs 2d per session of 3 hours - Public requested to obtain ticket from attendant". C took a chair & obtained a ticket. He then went to sit down & fell through the canvas. Judge would have found for C, but said that the wording on the ticket, "The council will not be liable for any accident or damage arising from hire of the chair" obliged him to find for D." On appeal it was decided there was no restriction on the notice because the ticket (which might not be obtained at the same time as the hiring of the chair), could not modify the terms of the contractParker v south Eastern train (1877) Bag left in railway station & ticket said see back & on the ticket it limited liability to £10 – C lost his bag & had not read the back of the ticket. Courts said INVALID – Handing over a ticket with an exclusion clause is INSUFFICIENT!!! Ticket doesn’t have contractual forceThompson v L M & S Railway Co (1930) Ticket said subject to timetable. It’s not contractual but Being directed to ‘Other’ info makes it VALID & CONTRACTUAL

Nature of clauses – Onerous Terms? (burdenous)Onerous terms MUST be specifically drawn to the attention of the party (THORNTON CASE ^)

Interfoto Picture Library v Stiletto Visual Programmes ltd. (1988) C delivered 47 photographic transparencies to D in jiffy bag. D was planning to use them for a presentation, but did not. It never opened the transparency bag or read Interfoto's standard terms & conditions, which were inside the bag. Condition 2 said there was a holding fee of £5 for each day over fourteen days. After around a month, Interfoto sent a bill for £3,783.50. Because the amount was exorbitant – & it was

an onerous term it should have been brought to the attention of the parties. DENNING: Some clauses (ONEROUS) should be printed in RED INK with a red pointed hand indicating it!

Course of dealingExemption clause may become part of a contract if there have been previous dealings!‘Course of dealings’ CASES illustrating regular & inconsistent dealings & where courts will incorporate this in cases.

Spurling v Bradshaw [1956] 1 WLR 461 D used services of a warehouse to store goods on regular basis. Each time he delivered goods to the warehouse he was asked to sign invoice which contained an exclusion clause. Invoice came after contract had been agreed. On one occasion he stored some barrels of orange juice & signed the invoice. When he went to pick them up, however, some of the barrels were empty & one contained dirty water. Consequently he refused to pay for the storage. C warehouse owners brought an action for the agreed price of storage relying on the exclusion clause to demonstrate that they were not liable for the damage to the goods. D argued the clause had not been incorporated into the contract as he signed the document after the contract was made. The clause was incorporated through previous dealings. D would have been aware of the term from the previous contracts & therefore it did form part of the contract. C was entitled to payment & D had no right to claim compensation for the damage to the orange juice.Hollier v Rambler Motors [1972] 2 WLR 401 CA C had used services of D garage on 3-4 occasions over five year period. Each time he was asked to sign a document excluding liability for damage. On this occasion the contract was made over the phone & no reference to the exclusion clause was made. The garage damaged the car during the repair work & sought to invoke the exclusion clause through previous dealings. There was not a sufficient number of or regularity of transactions to amount to a previous course of dealings capable of incorporating the exclusion clause. It was not reasonable to expect C to remember the clause from one transaction to the next. Consequently the garage was liable to pay for the damage.

Construction – Must be clear & not ambiguous

‘Contra proferentem’ rule ambiguity will be construed against party relying on the clause!

Houghton v Trafalgar Insurance [1953] 2 All ER 1409 CA C, the assured, claimed against the Trafalgar Insurance under an insurance policy in respect of a car accident which resulted in his car becoming a total loss. At the time of the accident the five seater car contained six people - the driver & one passenger in the front seats, & four passengers in the back of the car, three being seated on the back seat & one on the knees of another. The policy contained a clause which excluded Trafalgar Insurance's liability for 'Loss, damage, &/or liability caused or arising whilst any such car is... conveying any load in excess of that for which it was constructed.' Meaning of ‘LOAD’ ambiguous in case & therefore clause ineffectiveAilsa Craig Fishing v Malvern Fishing [1983] 1 WLR 964 HL A contract between existed between Securicor & Aberdeen Fishing Vessel Owners Association whereby Securicor were to provide security cover in the harbour where the C’s vessels were moored. As a result of negligence & breach of contract the C’s vessels sunk. The contract contained a clause which provided that in the event of negligence or breach, Securicor would not be liable for any amount exceeding £1,000 in any one claim & that it would not be liable for more than £10,000 in any twelve month period. HL held that where the clause

limits liability rather than excludes liability altogether the courts should apply the natural meaning of the clause & not be too eager to find ambiguity. Lord Wilberforce stated “…relevant words must be given, if possible, their natural, plain meaning. Clauses of limitation are not regarded by the courts with the same hostility as clauses of exclusion.”

EXCLUDING NEGLIGENCE Canada Steamships v R Appeal was allowed against the SCC judgment. It was said: clause 7 did not exclude negligence liability in clear enough terms & clause 17 was ambiguous & would be construed against the Crown. If a clause expressly excludes liability for negligence (or an appropriate synonym) then effect is given to that.[3] If not, one should ask whether the words are wide enough to exclude negligence & if there is doubt that is resolved against the one relying on the clause. If that is satisfied, then one should ask whether the clause could cover some alternative liability other than for negligence, & if it can, it covers that. Another form of liability for damage was   strict liability , & so the exclusion clause did not work to cover negligence.

Excluding negligence – usually covering strict liability only – needs careful wording to exclude liability for negligence1) To be effective must

include terms such asa. HOWSOEVER

CAUSEDb. No liability

WHATSOEVERc. SOLE RISK

Hollier v Rambler Motors [1972] 2 WLR 401 CA no reference to the exclusion clause was made. The garage damaged the car during the repair work & sought to invoke the exclusion clause through previous dealings. not a sufficient number of or regularity of transactions to amount to a previous course of dealings capable of incorporating the exclusion clause.Alderslade v Hendon Laundry (1945) 1 KB 189 C took laundry to be cleaned - when he picked it up it was gone. On C’s receipt it stated that the launderer was not responsible for loss of damage; & that this was limited to 20 times the cost of cleaning. The laundry had duty to take reasonable care & any excluding clause indicated that there was some liability - the clause did not include negligence of the launderer.

Even where an exclusion clause has been incorporated into a contract, it may not have been incorporated in a collateral contract.

Photo Production v Securicor [1980] AC 827 HL A contract for provision of security services by Securicor at the C’s factory. The security guard’s negligence caused the destruction of the C’s factory by fire. The contract contained a clause excluded liability for negligence of Securicor’s workers. Where the parties are negotiating at arms-length, & have set out who should bear the risks, the courts should be unwilling to interfereAndrews v Hopkinson [1957] 1 QB 229 C saw a car in the D’s garage, which the D described as follows: "It's a good little bus. I would stake my life on it". C agreed to take it on hire-purchase & D sold it to a finance company that made a h-p agreement with C. When the car was delivered C signed a note saying he was satisfied about its condition. Shortly afterwards, due to a defect in the steering, the car crashed. C was stopped from suing the finance company because of the delivery note but he sued the D. It was held that there was a collateral contract with the D who promised the car was in good condition & in return the plaintiff promised to make the h-p agreement. D was liable.

Effectiveness– UCTA/regulationsThe Act does not apply to insurance contracts; the sale of

George Mitchell v Finney Lock Seeds [1983] QB 284 CA C farmer George Mitchell purchased 30lb of Cabbage seed from D for £192. C planted the seed over 63 Acres & spent many hours of labour on the crops. The cabbage seeds only

land; contracts relating to companies; the sale of shares; & the carriage of goods by sea (Schedule 1); or to international supply contracts (s26).

REASONABLENESSTHE TEST UCTA Schedule 2Relative bargaining powerInducementDid the customer know / ought to know of terms?If it relates to conditionGoods manufactured to special order of customer

produced a small green leaf plant not fit for human consumption. The contract contained a clause which limited liability to the price of the seeds. C had lost £60,000 + interest on the defective seeds. The CA held that the clause was unreasonable as the buyer would not have been aware of the fault whereas the seller would.

Clause not negotiatedFault lay with suppliersBuyers could not have insured against risk: suppliers could’ve insuredLimiting liability to price grossly disproportionate

VITIATING FACTORS

DEFINITION/NOTES CASES FACTS/RELAVANCE/PRINCIPLE

MISREP= false statement of fact or law which induces the representee to enter a contract. Where statement made during negotiations is not a ‘term’ an action for MisRep may be available where the statement turns out to be untrue.

3 types of MisRep: innocent MisRep, negligent MisRep & fraudulent MisRep.MisRep- contract is voidableRemedy- depends on type or MisRep (generally=rescission & or damages).Law relating to MisRep found in common law with

False statementThere must be a false statement of fact or law as oppose to opinion or estimate of future events:

Bisset v Wilkinson [1927] AC 177 Privy Council Farm being sold in new Zealand, seller didn’t know anything about farming etc. the buyer said how many sheep can this land hold – the seller said I don’t know but he said I think ‘x’ amount – he bought the land – the amount of sheep held on land was less – he tried to terminate the contract however court. It was a true honest intention. HONESTLY HELD LAYMAN, NOT LIABLEEsso Petroleum v Mardon [1976] QB 801 CA Mr Mardon entered a tenancy agreement with Esso Petroleum in respect of a new Petrol station. Esso's experts had estimated that the petrol station would sell 200,000 gallons of petrol. This estimate was based on figures which were prepared prior to planning application. The planning permission changed the prominence of the petrol station which would have an adverse effect on the sales rate. Esso made no amendments to the estimate. The rent under the tenancy was also based on the erroneous estimate. Consequently it became impossible for Mr Mardon to run the petrol station profitably. In fact, despite his best endeavours the petrol station only sold 78,000 gallons in the first year & made a loss of £5,800. CA held that there was no action for MisRep as the statement was an estimate of future sales rather than a statement of fact. However, C was entitled to damages based on either negligent misstatement at common law or breach of warranty of a collateral contract.

A statement of opinion amounts to an actionable MisRep where the representor = in a position to know the facts

Smith v Land & House Property Corp (1884) 28 Ch D 7 C purchased a hotel. The seller described one of the tenants as being 'most desirable'. In fact, as the seller knew, the tenant was in arrears & on the verge of bankruptcy. held to be a statement of fact rather than opinion as the seller was in a position to know the facts.

A statement as to future intent can’t amount to a MisRep unless representor had no intention of carrying out the stated intent

Edgington v Fitzmaurice (1885) 29 Ch D 459 C purchased shares in D company. The company prospectus stated the shares were being offered in order to raise money to expand the company. In fact the company was experiencing financial difficulty & the money raised from the sale of the shares was going to be used to pay the company debts. Despite the fact that the statement related to a statement of future

the MisRep Act 1967 providing some further details.

intent, it was an actionable MisRep as the D had no intention of using the money to expand the company

False statement of law will now amount to an actionable MisRep

Pankhania v LB Hackney [2002] EWHC 2441 C’s purchased property induced by a representation that the current occupiers of the property were contractual licensees, whose occupation could be terminated on giving a 3 month notice. In fact the current occupant was in fact a tenant protected under the Landlord & Tenant Act 1954. This was a MisRep as to law which had previously been assumed not to be an actionable MisRep through analogy with case law based on restitutionary claims for mistake of law. Rule barring recovery for mistake of law was abolished by the HL’s in Kleinwort Benson v Lincoln County council. The High court held that actions based on MisRep of law could now be actionable based upon that change of law. C action successful.

Silence will not generally amount to a MisRep

Unless it is a contract of uberrimae fidei. ie one of utmost good faith such as an insurance contract or where the representor is in a fiduciary position. In such contracts a duty exists to disclose all material facts & a failure to do so may give rise to an action for MisRep.

Smith v Hughes (1871) LR 6 QB 597C had purchased a quantity of what he thought was old oats having been shown a sample. In fact the oats were new oats. C wanted the oats for horse feed & new oats were of no use to him. The seller was aware of the mistake of C but said nothing. C brought an action against the seller based on mistake & MisRep. both actions failed. The action based on MisRep failed as you cannot have silence as a MisRep. D had not mislead C to believe they were old oats. The action based on mistake failed as the mistake was not as to the fundamental terms of the contract but only a mistake as to quality.HIH Casualty & General Insurance v Chase Manhattan Bank [2003] UKHL 6 HL The clause was ineffective. The insurers were entitled to rescind the contract of insurance through both the MisRep & the non-disclosure.

(CHANGE OF CIRCUMSTANCES)

With v O’Flanagan [1936]Doctor had had enough of work & wanted to sell – he advertised it including the profit he’d been making – however he fell badly ill & more of his patient went elsewhere for care- at the time of the contract he did not voice this change & therefore was held liable Statement becomes false due to circumstances changing

Inducement/reliance

Establishing false statement; necessary for representee to demonstrate ‘statement’ induced contract entry. no inducement/reliance if representee naive of false statement:

Horsfall v Thomas [1862] 1 H&C 90 C purchased a gun which had a concealed defect. His action for MisRep failed as he hadn't inspected the gun before purchasing it. Therefore the MisRep did not induce him to enter the contract as he was unaware of it.

If the representee/agent checks validity of the statement =they’ve not relied on it

Attwood v Small [1838] UKHL J60 C purchased Corngreaves estate from D for £600k. Corngreaves estate consisted of mining land, iron works & various properties including mansion house. Many properties were subject to leasehold & generated income. The mines were to be worked by & profit to go to the C. A preliminary agreement was made between the parties whereby C agreed to purchase subject to being satisfied that the reports & accounts given by D were accurate. C then had his accountants & directors check out the accounts & reports who were satisfied they were accurate. C then proceeded with the purchase. It then transpired that

the accounts had greatly exaggerated the income generated by the estate & C sought to rescind the contract based on the MisRep contained in the reports & accounts. C was unsuccessful. (Experts checked reports = not reliance on accounts but own judgment.)

If the representee is given the opportunity to check out the statement but does not they are still able to demonstrate reliance

Redgrave v Hurd (1881) 20 Ch D 1 A solicitor purchased into the partnership in the solicitors' firm. He was told the partnership had an income of £300 per year & was given the opportunity to look at the accounts. He declined the offer to check the accounts & took them at their word. In fact the income was only £200 per year. He was entitled to rescind the contract as he relied on the statement. The fact that he had declined the offer to check the books reinforced rather than negated that reliance.

Types of MisRep

a. FraudulentLord Herschell defined fraudulent MisRep in Derry v Peek.

The burden of proof lies on the C

Derry v Peek (1889) 5 T.L.R. 625 In a company prospectus D stated the company had the right to use steam powered trams as oppose to horse powered trams. However, at the time the right to use steam powered trams was subject of approval of the Board of Trade, which was later refused. C purchased shares in the company in reliance of the statement made & brought a claim based on the alleged fraudulent representation of D. The statement was not fraudulent but made in the honest belief that approval was forthcoming.Lord Herschell defined fraudulent MisRep as a statement which is made either.

I. knowing it to be false, II. without belief in its truth, or

III. Recklessly, careless as to whether it be true or false.

b. NegligentUnder statute-Under s.2(1) MisRep Act 1967, a negligent MisRep is a statement made without reasonable grounds for belief in its truth. The burden of proof being on the representor to demonstrate they had reasonable grounds for believing the statement to be true.

This burden of proof is difficult to discharge

Common Law (TORT)-

s2(1) MisRep Act 1967“Where a person has entered into a contract after a MisRep has been made to him by another party thereto & as a result thereof he has suffered loss,

then, if the person making the representation would be liable to damages in respect thereof had the MisRep been made fraudulently, that person shall be so liable notwithstanding that the representation was not made fraudulently,

Unless he proves that he had reasonable grounds to believe & did believe up to the time the contract was made that the facts represented were true.”

Hedley Byrne C =advertising agency made advertising work for Easipower. Hedley was responsible for any amount which was not paid by Easipower since they’to pay for advertising orders. Later Hedley became curious about financial position of Easipower affording another advertising which Hedley may give on credit. Easipower Bank [D] gave a report of Easipowers financial position; they’ve enough resources for ordinary business proceedings, but stated that the report was given "without responsibility." Based on the report which was given by the respondents, Hedley added another orders on behalf of Easipower which later on were not covered by sufficient resources. It meant a loss of £17,000 for Hedley Byrne. Hedley sued the respondents for damages under the tort of negligence. Negligent, although honest, MisRep, may give rise to action for damages for financial loss even if no contract existed between advisor/advisee & no fiduciary relationship. The law will imply a duty of

care when the advisee seeks information from an advisor who has special skill & where the advisee trusts the advisor to exercise due care, & that the advisor knew or ought to have known that reliance was being placed upon his skill & judgment. However, in this case there was an express disclaimer of responsibility & there was therefore be no liability. This case established the doctrine of negligent MisRep, but in this case the disclaimer effectively barred the claim

c. InnocentWhere the representor can demonstrate reasonable grounds for belief in the truth of the statement. See s.2(1) MA 1967

Solicitor selling practise – honestly believe it was making X profit – it was falseIt was a MisRep, but he honestly believed that was true as the accounts suggested he was true!

a. From Acti. Believed it was trueii. Reasonable grounds for belief

Remediesa. Rescission b. Indemnity c. Damages

Rescission - setting aside of contract by innocent party; Voidable by INNOCENT party. Contract valid unless/until set aside - Effect is contract is ‘ void ab initio’ – void from the beginning MUST be Restitutio in Integrum – completely restorable (totally)BARS TO RESCIND!!AffirmationLapse Of Time

Long v Lloyd [1958] Driving defective lorry. Right to rescind lost when driven after C became aware of MisRep.Leaf v International Galleries [1950] Buyer bought painting believing it was by constable, Innocent MISREP. Painting not a Constable. Buyer sought rescission due to innocent MisRep. Held - 5 years unreasonable delay

Indemnity - Financial payment to make good a loss suffered by representee. Only in respect of obligations to 3rd parties incurred as necessary/inevitable result of contract

Whittington v Seale Hayne 1900 Poultry farmers could recover rent, rates & repairs but not loss of profits. Courts held: they can claim for the misrep TORT to indemnify you for 3rd parties involved!!

Damage -fraudulent MisRep=innocent party entitled to rescind contract & claim damages. Damages awarded aren’t based on contractual principles but damages available in tort of deceit. Thus no requirement that the damages are able

Doyle v Olby [1969] 2 QB 158 C, Doyle, purchased a business from the D, Olby, as a result of a several fraudulent MisReps relating to the profitability & operations of the business. The trial judge assessed damages on contractual principles as to what position C would have been in had the statements been true & awarded a sum of £1.5k. However, C had suffered loss to the extent of £5.5k as a result of entering the contract. C appealed on the assessment of damages. Contractual damages are not applicable to MisRep since a representation is not a term of a contract. Where there has been a fraudulent MisRep damages should be assessed in the tort of deceit.Smith New Court Securities v Scrimgeour Vickers [1996] 3 WLR 1051Sale by def. of 28 million Ferranti shares for 82p each. P initially prepared to pay only 78p each. Share price went down, P sold shares losing £11m.HL Held - P entitled to recover their full loss, ie difference between share purchase & sale price.HL set out following principles:- P can recover all losses flowing from transaction- Damage need not be foreseeable - P can recover full price less any benefits received from

transaction- Entitled to recover consequential losses- P must take all reasonable steps to mitigate losses.

UNDUE INFLUENCE – UI

DEFINITION/NOTES CASES FACTS/RELAVANCE/PRINCIPLE

Contract entered result of pressure; falls short of amounting to duress. Contract entered into as a result of UI; render the contract voidable.UI existing relationship between parties, exploited by one, to gain an unfair advantage. Divided into actual UI & presumed UI

Manifest disadvantage? (MD)Originally a requirement, that C seeking to find relief through actual UI must also establish that they suffered a MD (BCCI v Aboody).Held in CIBC Mortgages v Pitt   [1994] 1 AC 200  that MD was not required in cases of actual UI.

Classes of UI:3 classes of UI set out in BCCI v Aboody [1990] 1 QB 923

Class1-Actual UIClass2a-Presumed UIClass2b-Presumed UI

Class 1 - Actual UIRequires proof; contract was entered into as a result of actual influence exerted. C must plead/prove acts which they assert amounted to UI.

RBS v Etridge [1998] 4 All ER 705 HL "UI- 1 of the grounds of relief developed courts. Objective: ensure that influence of one person over another not abused… The law sets limits to the means properly employable for this purpose. Law will investigate the manner in which the intention to enter into the transaction was secured: If intention produced by an unacceptable means, law won’t permit transaction to stand. Means used is regarded as an exercise of improper or ‘U’ ‘I’… The circumstances a person acquires influence over another, & the manner in which influence may be exercised, vary…"

Class 2a - Presumed UIEstablishing the presumptionNo requirement to prove improper influence was exerted. Instead it must be established:1. Relationships capable

of giving rise to presumption of UI those of a fiduciary nature & include:a. Parent: childb. Solicitor: Clientc. Doctor: Patient

Doesn’t include husband/wife!2. The transaction is one

which cannot readily be explained by the relationship of the parties

Where transaction is obviously not to the benefit of the vulnerable party but confers great advantage to the party in a fiduciary position, law will raise presumption the transaction was entered result of abuse of relationship.

Natwest Bank v Morgan [1985] AC 686 HL Family home subject to a mortgage for the purchase price & a second charge securing a loan of the husband's business. Couple unable to meet the payments & got into debt. Abbey bank obtained possession order. Natwest offered rescue package to help couple save the home where they would pay off the existing mortgages & give bridging loan lasting 5 weeks for purposes of aiding husbands business.  Manager called at couples' home in order to explain the effect of the charge & to obtain the signatures of both parties. He was at the house for 20 minutes & spent 5 minutes alone with the wife. Husband reluctant to leave them & was said to be hanging around. Manager told the wife the charge was to pay off existing debt/to provide bridging loan for period of 5 weeks which was what the bank had intended to provide, however, actual document didn’t limit the amount or time. Mrs Morgan told the manager that she didn’t want to be exposed to any risks of her husband’s business. Manager assured her that risks

were limited in the way he described. At no time did the manager advise her to get independent legal advice. She signed the charge. Bank later called in the charge. In her defence the wife stated that the bank manager had exercised UI over her in procuring her signature. normal relationship between a customer & banker was not one so as to give rise to a relationship of trust & confidence. Lloyds Bank v Bundy was confined to its facts but not expressly overruled. The wife had not established a relationship of trust & confidence & therefore no presumption of UI could arise.Bank of Credit & Commerce International v Aboody [1990] 1 QB 923 CA Husband exerted actual UI over his wife in order to get her to sign a charge securing the family home on the debts owed by the company in which the husband & wife owned shares. Unable to repay the mortgage, the bank sought to repossess the home. Wife sought to have mortgage set aside on grounds that it was procured by actual UI of the husband. The husband had exerted actual UI on the wife. However, the transaction was not to the MD of the wife since she owned shares in the company. In considering whether a transaction was to MD the court was to consider benefits received in addition to risks undertaken. Bank granted possession.NB - it is no longer necessary to establish MD in cases involving actual UICIBC Mortgages v Pitt [1994] 1 AC 200 HL Mr Pitt wished to purchase shares. Pressured his wife into signing a mortgage of £150,000 securing the family home. Stated purpose of loan ‘purchase a holiday home & pay off the existing mortgage’. Husband used the money to purchase shares/then used those shares as collateral to purchase further shares. For a time the shares did very well & he was a millionaire on paper. The wife saw no benefit from these shares as any income was always used to purchase more shares. In 1987 the stock market crashed. Bank sought to enforce the security under the mortgage which at the time exceeded the value of the home. Wife raised actual UI in defence. Overruling BBCI v Aboody - it is not necessary for a C to demonstrate MD where a defence is based on actual UI. However, as the transaction on its face did not seem to the MD of the wife, because the stated purpose was to purchase a holiday home, the bank was not put on enquiry, thus couldn’t be fixed with constructive notice.

Class 2b - Presumed UIEstablishing the presumptionNo automatic presumption. Must be established that there is a relationship; one party in fact placed trust & confidence in other to safeguard their interest. Any relationship capable of amounting to this; husband/wife, employer/employee. Distinction between 2a & 2b is that trust &

Barclays Bank v O'Brien [1993] QB 109 Mr O'Brien chartered accountant also had shareholding in company in which he was auditor. Company was experiencing financial difficulty. The bank wished to find security for company debts. O'Brien offered marital home telling his wife that the charge was limited to £60,000 & that it was only to last for a few weeks. Initially wife refused to sign, later persuaded to sign as the husband told her the company would fail if she didn’t & her son, who also had an interest in the company, would lose his home. In fact charge was not limited in amount/time. The wife agreed to sign the charge. Manager of the bank had left sent the documents to their local branch with instructions the wife was to be advised of full extent of liability should be advised to take independent advice before signing. However, the bank clerk got the wife to sign & failed to carry out the instructions.

confidence relationship must be proved. It is no longer the case that wives will place their trust in husbands to deal with financial matters. If the wife exercises independence of mind in financial matters then no presumption will be established.

Bank sought to enforce charge & the wife raised UI/MisRep in her defence to have the charge set aside. Defence based on UI failed because wife held to exercise independence of thought on financial matters/was used to dealing with family finances whilst husband was working away. Wife was successful with regards to MisRep. Charge set aside as bank had constructive notice of MisRep & failed to take reasonable steps to ensure the charge was obtained without influence or Mrs O'Brien was aware to the extent of liability.Meet with wife separatelyAdvise as to risksEnsure free will & full knowledgeheld that a relationship of trust & confidence existed between a bank manager & his client: Lloyds Bank v Bundy [1975] QB 326 CA Father secured debts of his son's business on his farm which had been in family generations. Father/son had banked at the branch for years relying on advice given. Son’s company also banked at same branch & bank manager was aware of the dire financial position of the company. Bank allowed son to overdraft exceeding security given thus far & was fearful that the company would go under leaving them with an unsecured debt. The bank manager/son called at the farm with the forms already filled in. Father was told the amount of the charge which was £11,000 & exceeded value of the farm & he was also required to give a guarantee. Father agreed to sign to help his son. Not given the opportunity to think it over or obtain legal advice. There was a relationship of trust & confidence between the father & the bank manager giving rise to a presumption of UI under class 2 b. The charge & guarantee were therefore set aside. NB the normal relationship between a banker & customer is not one of trust & confidence but a business relationship whereby the bank is looking out for its own interest however bank manager, giving evidence admitted the father relied implicitly/solely on advice given by him & the father stated he trusted the bank/had a long relationship with the bank.normal relationship between banker & client isn’t of trust & confidence:National Westminster Bank v Morgan   [1985] 1 AC 686 See aboveA relationship of trust & confidence has also been seen in employer & employee relationship: Credit Lyonnaise Bank Nederland v Burch Miss Burch started working for her employer at the age of 18. Became close to director, Mr P, trusted him implicitly. At 21 she purchased a flat. 5 yrs later, still working for him but the company experiencing financial difficulty. Mr P asked her to put her flat up as security for a loan taken for company. He said that his home & villa in Italy were also secured on debt but they wouldn’t accept 100% mortgage on these properties/needed another £20,000. She agreed to allow her home to be used believing that it was £20,000 & that Mr P’s properties would be sold releasing the debt so there was no risk to her. Bank wrote to her/informed her the charge was unlimited in amount/time & advised her to seek independent advice. She was not told of the extent of the company's borrowings which stood at £270,000 neither did the bank satisfy them that she had in fact received

independent advice. The agreement of Miss Burch had been obtained by UI & bank had notice of this as the transaction was so obviously to her disadvantage. The bank had taken insufficient steps to avoid constructive notice. Therefore the transaction could be set aside.No need to establish that the party subject to influence would not have entered into the contract but for the influence. There is also no need to establish a causal link in relation to MisRep beyond reliance: UCB Corporate Services Ltd. v Williams [2002] EWCA Civ 555 Williams’ family ran a garage business as a partnership with the benefit of a franchise from Toyota. Toyota threatened withdrawal unless showrooms were extended/improved. The cost for this was £500k. Williams’ approached bank for a loan which asked for security by way of a charge on the three showrooms in addition to a charge on each of the partners' homes. The D, Mrs Williams, was the wife of one of the sons. She had signed the charge without having been told the full extent of the liability. The signature was executed in the presence of all the other partners & witnessed by Mr.Howells, the solicitor of the partnership. The charge secured all debts present & future of the partnership & provided for joint & several liability of all the partners. Unable to repay the loan = bankrupt. UCB sought to enforce the charge & Mrs Williams raised UI & MisRep in her defence. The trial judge held that UI & MisRep were established. However, he held that Mrs Williams would have signed the charge in any event had she known the full facts & also that UCB were not fixed with constructive notice as a solicitor had witnessed the signature therefore they could assume Mrs Williams had been advised accordingly. Mrs Williams appealed to the CA. Mrs Williams was successful on both grounds. For both UI & MisRep there is no requirement to establish that a person would not have entered the contract but for the influence or MisRep. It was sufficient for UI, that an equitable wrong has been committed. For MisRep it is sufficient to demonstrate the party relied on the false statement. UCB were fixed with constructive notice. The fact that the signature was witnessed by a solicitor does not necessarily mean that they would have advised her. The role of a solicitor will depend upon what they had been instructed to do. If there were no instructions to advise Mrs Williams they would not be expected to do so & it was wrong of UCB to assume this had taken place. They were under a duty to check if she had in fact been advised.

Rebutting the presumption in class 2a & class 2bThe party accused of exercising UI may rebut the presumption by demonstrating that the vulnerable party exercised free will in

UI & third partiesGenerally the UI is exercised between a husband & wife. Where a wife establishes UI it will entitle her to have the transaction set aside as against her husband, however, the transaction is generally with a bank who was not a party to the influence. Following the decision in Natwest v Morgan, it became clear that banks were not acting in a fiduciary

Constructive noticeConstructive notice arises where the bank is1. put on enquiry &2. Fails to take reasonable steps to ensure that the

transaction was entered freely without the exercise of UI.EnquiryConsideration of factors which put the bank on enquiry:Bank Of Scotland v Bennett & Anor [1998] EWCA Civ 1965 The bank held a guarantee & charge on the Bennett family home securing the debts of a business in which the husband was the director & 47% shareholder. The wife also held shares (11%). The wife was the sole beneficial owner of the matrimonial home. The wife was against her husband's involvement in the business. He had left a well paid reliable

entering the transaction. This is most commonly established by demonstrating that they were fully aware of the risks involved & had received legal advice before agreeing to the transaction.

capacity so as to give rise to a presumption of UI. There had to exist another factor in order to have the contract set aside as against a bank. Barclays Bank v O'Brien [1993] QB 109  (Case summary) introduced the concept of constructive notice.

job to start it. She had no faith in the business & did not want to sign the charge but her husband pressured her & threatened to end the relationship if she did not sign. The trial judge held that the charge was procured by actual UI of which the bank had constructive notice. The bank appealed. The charge was procured by actual UI although the trial judge erred in finding constructive notice. The trial judge had assumed the bank had the knowledge that the wife was the sole beneficial owner of the property & only held an 11% sharing holding when there was in fact no evidence that they were aware of these facts.Conoco Ltd v Khan & Anor [1996] EWCA Civ 968 D, Mr & Mrs Khan, owned a petrol station run by Mr Khan. Mr Khan entered agreement with the C, supplier of petrol, where the D was to borrow £300k which was to be secured on the petrol station, to be repaid by 5 annual instalments. Loan was to pay for supply of petrol during the five years. Also by the agreement the D’s weren’t to purchase petrol from any other supplier. D’s breached agreement. C’s terminated contract/demanded the balance outstanding under the loan standing at £240,000. Mrs Khan raised class 2 b UI in defence stating she took no part in the running of the business & always signed what her husband asked her to. She didn’t speak English & had no knowledge of the effect of what she signed. She trusted her husband. She hadn’t been given advice as to what she was signing. Bank wasn’t put on enquiry. Agreement was commercial under which she was to obtain benefits. C would have no reason to consider that the wife should obtain independent advice.

the current factors to be considered were set out in:

Royal Bank of Scotland v Etridge  [1998] 4 All ER 705 HL The case concerned a number of conjoined appeals concerning banks seeking possession of homes where a wife had signed a charge or mortgage agreeing to secure the debts of the husband on the family home. The HL reviewed the current authorities & restated some of the principles. The main changes:Manifest disadvantageThis term should no longer be used as it is ambiguous & leads to many misunderstandings & is often misapplied. Instead the transaction must be one which cannot readily be explained on ground of friendship, relationship or charity.Constructive noticeA bank will be put on enquiry whenever a wife offers to stand surety for her husband's debts. There is no need to show that the bank was aware of the relationship capable of giving rise to a presumption of influence. There is no absolute obligation on a bank to have a private meeting with the wife provided they take other steps to satisfy themselves that the wife has been appropriately advised. This may be achieved through confirmation from a solicitor that she has been advised.The steps a solicitor should take as a core minimum:(1) He will need to explain the nature of the documents & the practical consequences these will have for the wife if she signs them. She could lose her home if her husband's business does not prosper. Her home may be her only substantial asset, as well as the family's home. She could be made bankrupt. (2) He will need to point out the seriousness of the risks

involved. The wife should be told the purpose of the proposed new facility, the amount & principal terms of the new facility, & that the bank might increase the amount of the facility, or change its terms, or grant a new facility, without reference to her. She should be told the amount of her liability under her guarantee. The solicitor should discuss the wife's financial means, including her understanding of the value of the property being charged. The solicitor should discuss whether the wife or her husband has any other assets out of which repayment could be made if the husband's business should fail. These matters are relevant to the seriousness of the risks involved.(3) The solicitor will need to state clearly that the wife has a choice. The decision is hers & hers alone. Explanation of the choice facing the wife will call for some discussion of the present financial position, including the amount of the husband's present indebtedness, & the amount of his current overdraft facility. (4) The solicitor should check whether the wife wishes to proceed. She should be asked whether she is content that the solicitor should write to the bank confirming he has explained to her the nature of the documents & the practical implications they may have for her, or whether, for instance, she would prefer him to negotiate with the bank on the terms of the transaction. Matters for negotiation could include the sequence in which the various securities will be called upon or a specific or lower limit to her liabilities. The solicitor should not give any confirmation to the bank without the wife's authority.The solicitor's discussion with the wife should take place at a face-to-face meeting, in the absence of the husband. The solicitor's explanations should use non-technical language.The solicitor should obtain from the bank any information he needs. If the bank fails for any reason to provide information requested by the solicitor, the solicitor should decline to provide the confirmation sought by the bank.Agency? Where a bank instructs solicitors to advise the wife, the solicitor acts solely for the wife & not as an agent for the bank: Barclays Bank Plc v Thompson [1997] 4 All ER 816  CA Mrs Thompson was the sole beneficial owner of the family home. She signed a mortgage securing the debts of the husband's business on the family home. She had received advice from a firm of solicitors appointed by the bank who were also the husband's solicitors. The advice she received was defective in that it failed to explain the full extent of liability. The solicitors wrote to the bank certifying that Mrs Thompson had been advised. The bank later sought possession of the property. Mrs Thompson argued that the fact that the solicitor was that of the bank that the knowledge of the defective advice should be imputed to the bank. Mrs Thompson was unsuccessful. Bank entitled to assume that the solicitors had correctly advised the wife. The doctrine of imputed knowledge had not survived Barclays Bank v O'Brien. The correct analysis was in terms of constructive notice & reasonable steps. Whilst the solicitor was the agent of the bank there was no duty of an agent to disclose their short comings to the principal.This applies even where the bank paid for the advice:

National Westminster Bank Plc v Beaton & Anor [1997] EWCA Civ 1391

DURESS DEFINITION/NOTES CASES FACTS/RELAVANCE/PRINCIPLE

Duress in contract law relates to where a person enters an agreement as a result of threats. Where a party enters a contract because of duress they may have the contract set aside. Originally, the common law only recognised threats of unlawful physical violence, however, in more recent times the courts have recognised economic duress as giving rise to a valid claim. Where the threat is to goods the courts have been less willing to intervene, although analogous claims in restitution suggest that this position of the law may change. The basis of theduress as a vitiating factor in contract law is that there is an absence of free

Duress to the person

Where a person enters a contract as a result of threats of physical violence, the contract may be set aside providing the threat was a cause of entering the contract. There is no need to establish that they would not have entered the contract but for the threat:

Barton v Armstrong [1976] AC 104 Privy Council Armstrong was the chairman & held the largest sharing holding in Landmark Corporation Ltd a public company. Barton was the managing director & also had a substantial shareholding in. There were two other directors Bovil & Cottrel. There had been a long history of ill will between the parties & a struggle over who should have controlling power with Armstrong being the most aggressive. The other directors in the company were also unhappy with Armstrong & wanted him to be removed for abusing certain privileges & they disagreed with the way he ran the company believing him to be putting the company at risk of insolvency. However, Armstrong refused to resign. The three managed to take control of subsidiary companies & removed all credit facilities from Landmark Corp. When Armstrong discovered the credit had been removed he made a number of death threats to Barton to pressure him into signing an agreement which contained various elements including the purchase by Barton of Armstrong's shares in the company at a substantial over value. Barton agreed to this partly due to the threats but also due to the fact that it would mean that Armstrong would no longer have controlling interest & he believed he would be able to turn the company around without Armstrong's dealings. However, the company became insolvent shortly after & Barton sought to have the contract set aside. The contract could be set aside. Where there is duress to the person there was no obligation to show that he would not have entered the agreement but for the threat, it simply being sufficient that the death threats were a cause.

Duress to goodsDuress to goods is not recognised as giving rise to grounds for having the contract set aside:

Skeate v Beale [1840] 11 Ad & El 983 A landlord was owed money by a tenant. He seized goods owned by the tenant & threatened to sell them immediately unless the tenant entered an agreement for repayment of the sums owned. The tenant agreed to the repayment terms but then sought to have the agreement set aside for duress. Duress to goods will not suffice to render a contract voidable. However, this decision has received widespread criticism & is out of line with restitutionary claims:Maskell v Horner [1915] 3 KB 106 D demanded money from C by way of a 'toll fee' for his market stall. D had no legal basis for demanding this money. D threatened to seize the C's stock & sell it if he did not pay up. C paid the toll fee for a considerable period of time & then brought an action for money had & received to recover the money paid under duress. C was entitled to recover the sums paid in the law of restitution. This decision is out of line with the law on duress of goods in contract law & is considered by some as demonstrating that the position taken in contract law should be revised.

Economic duress first canvassed by Kerr J in The Sibeon & the Sibotre. Whilst the contract was not held

Occidental Worldwide Investment v Skibs (The Sibeon & The Sibotre) [1976] 1 Lloyds Rep 293 D chartered two vessels from the C. D told C that they would go bankrupt if they did not lower the cost of charter. This was completely untrue. C

consent. Duress operates at common law. Pressure not amounting to duress may give rise to an action forUI in equity. The affect of a finding of duress & UI is that the contract is voidable. The innocent party may rescind the contract & claim damages. The normal bars to rescission operate (see misrep lecture).

voidable for duress, Kerr J stated that where there’s coercion of will so as to vitiate consent it should be possible to set the contract aside. However, commercial pressure was not enough.

feared that they would lose valuable customers & they were also were owed substantial amounts of money by D which they feared they would lose if D did become insolvent. The Cs therefore agreed to renegotiate the contract to lower the cost of charter. They later sought to have the renegotiated contract set aside. Whilst recognising that it would be possible to render a contract voidable for economic duress, it was not established in this case. To amount to economic duress there had to be a coercion of the will so as to vitiate consent. Commercial pressure was not sufficient.NB: This was the first case where economic duress was recognised as giving rise to a cause of action. More recent cases look to absence of choice rather than coercion of the will vitiating consent. See: The Universe Sentinel

Following Kerr J's line of reasoning, economic duress was found to exist in The Atlantic Baron, however, C lost their right to rescind:North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705 D agreed to build a ship for the Cs for a certain price specified in US dollars. After entering the contract the US dollar was devalued by 10%. D threatened not to complete unless the Cs paid an additional 10% on the contractually agreed price. The Cs had a valuable charter lined up so agreed to pay the additional sums & did pay them without protest. 8 months after delivery of the ship the Cs brought an action to recover the additional sums paid. The contract was voidable for duress, however, since the Cs had left it so long in bringing their claim they had affirmed the contract & lost their right to rescind. C threatened not to complete the main contract for the purchase of shares unless subsidiary agreements were met including a guarantee & an indemnity. D was anxious to complete the main contract as there had been a public announcement of the aquisition of shares & did not want to undermine public confidence in the company & the consequent affect on share prices. D could’ve sued for specific performance of the agreement but this would have delayed matters & damaged the company's reputation. D had taken legal advice on all these matters before agreeing to the guarantee & indemnity. C then sought to enforce the guarantee & D sought to have the agreement set aside for economic duress. There was no economic duress. The Privy Council identified 4 factors to consider in assessing whether economic duress was present:Did the person claiming to be coerced protest?Did that person have any other available course of action?Were they independently advised?After entering into the contract, did they take steps to avoid it?In the present case D did not protest at the time. He also could’ve enforced the contract of sale through specific performance & thus had another avenue of redress available to him. He had taken legal advice & took no steps to avoid the agreement prior to C seeking to enforce the guarantee. Therefore no economic duress could be established. It was

simply commercial pressure far short of duress.The Privy Council identified 4 factors to consider in assessing whether economic duress was present:

1. Did the person claiming to be coerced protest? 2. Did that person have any other available course of

action?3. Were they independently advised? 4. After entering into the contract, did they take steps to

avoid it?

The requirement of vitiation of consent was replaced in   The Universe Sentinel   with the absence of choice: Universe Tankships v International Transport Workers Federation, The Universe Sentinel [1983] 1AC 366 HL The ITWF blacked a ship, The Universe Sentinel, to prevent it from leaving port. They made several demands in relation to pay & conditions & also demanded the ship owners pay a large sum of money to the Seafarers International Welfare Fund. The ship owners agreed in order that the ship could leave port & then sought to recover the sum paid to the welfare fund. The money had been extracted under economic duress & could be recovered. The HL held that earlier case law had been wrong to look at coercion of the will so as to vitiate consent. During an analogy with the defence in criminal law where it is recognised that a D acting under duress has the intention to commit the offence but is excused from the crime because they had no choice but to submit.Accordingly two elements of duress were identified:Compulsion of the will - absence of choiceIllegitimacy of the pressure

Illegitimacy of the pressureInitially it was thought that the threat must be unlawful:However, dicta form Lord Hoffman in the Privy Council case of R v   Attorney General for England & Wales [2003] UKPC 22 suggests a different approach:"The legitimacy of the pressure must be examined from two aspects: first, the nature of the pressure & secondly, the nature of the demand which the pressure is applied to support: see Lord Scarman in the Universe Tankshipscase, at p 401. Generally speaking, the threat of any form of unlawful action will be regarded as illegitimate. On the other hand, that fact that the threat is lawful does not necessarily make the pressure legitimate. As Lord Atkin said in Thorne v

Dimskal Shipping v ITWF (The Evia Luck) [1991]4 All ER 871 CA The ITWF threatened strike action unless certain demands were met. The cost of strike action would be astronomical for Dimskal & therefore they agreed to the demands. They later sought to have the agreement set aside as being procured by duress. There was clearly present a coercion of the will & absence of choice the main question for the court was the legitimacy of the pressure. At the time of the threatened strike the Evia Luck was in Sweden. The court had to determine whether English law applied or Swedish law applied to the threatened strike action as under Swedish law the threatened strike would be lawful so there would be no illegitimate pressure applied, however, under English law the strike would be unlawful & the threat would be regarded as illegitimate. English law applied & the threat was therefore unlawful & illegitimate.

CTN Cash & Carry v Gallagher [1994] 4 All ER 714 CA D sent a consignment of cigarettes to the wrong address. The cigarettes were then stolen. D mistakenly believed that the cigarettes were at the C's risk & sent them an invoice. D threatened to withdraw the C's credit facility unless the invoice was paid. The Cs needed the credit facilities & so paid the invoice & then sought to reclaim the money on the grounds of economic duress. The threat to withdraw credit facility was lawful since under the terms of the credit agreement credit could be withdrawn at any time.

Motor Trade Association [1937] AC 797, 806:"The ordinary blackmailer normally threatens to do what he has a perfect right to do - namely, communicate some compromising conduct to a person whose knowledge is likely to affect the person threatened ... What he has to justify is not the threat, but the demand of money.""

R v Attorney-General for England & Wales [2003] UKPC 22 Privy CouncilLawful demand may constitute illegitimate pressure where the demand is not justified. However, there must still be absence of choice. R was not acting under military orders to sign the agreement. He may have been faced with overwhelming pressure, but he still had choice. The MOD were justified in introducing the confidentiality agreement therefore the demand was both lawful & justified & thus did not amount to illegitimate pressure.

Therefore the threat was legitimate & consequently, economic duress could not be established.

Effect of a finding of duressSince duress operates to deflect the will of the party rather than vitiate consent, the effect of a finding of duress is always to make the contract voidable not void:

IFR ltd v Federal Trade Spa  [2001] EWHC 519 QB In 1998 an agreement was entered in to between IFR (English company) & Federal (Italian company) whereby IFR were to distribute & give sole right of resale of certain specified items including radio, electronic & telecommunication equipment. The agreement was to last for 2 years. This succeeded an earlier agreement & contained a jurisdiction clause (stating the agreement would be governed by English law) & an arbitration clause which were not in the earlier agreement. Three months before the contract was due to expire IFR gave notice in writing that they would not be renewing the contract when it expired. Under Italian law this termination would give rise to compensation. However, no such compensation was payable under English law. Federal sought to raise duress to render the 1998 agreement void so as to take advantage of the Italian right to compensation. The effect of a finding of duress has always been to render a contract voidable as oppose to void, however, a voidable contract would not have aided Federal as they had acted on the contract without protest for nearly 2 years so would most certainly have lost their right to rescind. In their argument they raised the earlier case law relating to vitiating consent (The Sibeon & Sibotre, The Atlantic Baron & Pao On) & stated that where

there is no consent the contract must be void ab initio as oppose to voidable.  Following later case law (Universe Sentinel etc) the basis of duress is not the absence of consent; when acting under duress the actor will give consent for the contract. The contract is therefore initially valid. It is the absence of choice that renders the contract voidable.

DISCHARGE CONTRACT

DEFINITION/NOTES CASES FACTS/RELAVANCE/PRINCIPLE

Discharge of a contract relates to the circumstances in which the contract is brought to an end. Where a contract is discharged, each party is freed from their continuing obligations under the contract. A contract may be discharged in one of the following ways.

AgreementPerformanceBreach

Agreement When both parties agree to bring the contract to an end & release each other from their contractual obligations. For a contract to be discharged through agreement there must be Accord & Satisfaction.Accord = agreement; Each party must agree to end the contract. The agreement must be freely given.Satisfaction = consideration; Both parties must also provide consideration. If both parties have continuing obligations then generally the consideration will be simply each of them giving up their rights under the contract. The only time consideration becomes an issue is where one party has fully performed their part of the contract when the other has not. The non-performing party must then provide consideration to make the agreement binding. Also if the agreement is made by deed there is no requirement to provide consideration. There is in effect a contract to end a contract.Perform a nce where both parties have fully performed their contractual obligations. If one party does not fully perform the contract this will amount to a breach of contract & the other party may have a claim for damages unless the contract has been frustrated. If the non-performance amounts to a repudiatory breach (breach of condition) the other party will be released from their obligations. Where a contract is one where the price is payable on completion, then completion is generally required in order to discharge the contract. This is often expressed in the terms of being a condition precedent. Completion triggers the requirement of payment: no completion, no payment. This general rule was established in Cutter v Powell & is obviously capable of causing injustice:

Cutter v Powell [1795] EWHC KB J13 C husband agreed by contract to act as a second mate on the ship the 'Governor Parry' on a return voyage to Jamaica. The voyage was to take eight weeks & he was to be paid on completion. A term in the contract stated: "Ten days after the ship 'Governor Parry,' myself master, arrives at Liverpool, I promise to pay to Mr. T. Cutter the sum of thirty guineas, provided he proceeds, continues & does his duty as second mate in the said ship from hence to the port of Liverpool. Kingston, July 31st, 1793."  Six weeks into the voyage C husband died. C sought to claim a sum to represent the six weeks work undertaken. The wife's action failed. Payment was on condition that he worked the ship to Liverpool, since he did not fulfil this condition the widow was entitled to nothing.Divisible/Severable contracts - rule relating to   discharge through full   performance applies where there exists an entire contract. Where it is possible to divide a contract into separate parts, eg. if a sum is agreed to be payable per week or hour, then the courts can award a sum for the separate parts of the contract which have been completed:Ritchie v Atkinson (1808) 10 East 295 By contract C agreed to carry a cargo of specified quantity of hemp & iron. The price agreed was £5 per ton for the hemp & 5 shillings per ton of iron. C only carried part of the agreed quantity. D argued the contract had not been fully performed & therefore no payment was due.  Contract could be divided into separate bits as the parties agreed a price per ton. C was thus entitled to payment for the amount carried although D was entitled to damages for non-performance in relation to the amount not carried.Rose & Frank Co v Crompton Bros [1925] AC 445 HL C & D entered an agreement for the supply of some carbonised tissue paper. Under the agreement C’s were to be D’s sole agents in the US until March 1920. The contract contained an honourable pledge clause which stated the agreement was not a formal or legal agreement & shall not be subject to the jurisdiction of the courts in neither England nor the US. D’s terminated the agreement early & the Cs brought an action for breach. The honourable pledge clause rebutted the presumption which normally exists in commercial agreements that the parties intend to be legally bound by their agreements. Agreement had no legal affect & was not enforceable by the courts.

Substantial performance where a court is satisfied that substantial performance is present. The court may then award the contractually agreed price & deduct sums to reflect the amount not performed. If however, the performance is not held to amount to substantial performance C is entitled to nothing.   Difficulty arises   as to   what amounts to substantial performance. There is no precise limit set down but is to be determined on the facts of individual cases. Bolton v Mahadeva [1972] 1 WLR 1009 CA C installed central heating in D’s home. The agreed contract price was £560. D was not happy with the work & refused to pay. Defects in the work amounted to £174. The action by C to enforce the payment failed since the court held there was no substantial performance.Hoenig v Isaacs [1952] 2 All ER 176 CA C agreed to decorate & furnish D’s flat for £750 payable by two instalments & the balance on completion. C completed the work but D was unsatisfied some of the furnishings & refused to pay the all the final instalment. The cost of the defects in the furniture came to £56. C had substantially performed the contract & was therefore entitled to the contractually agreed price minus the cost of the defectsAcceptance of partial performance Where one party freely agrees to accept partial performance, then a sum is payable for the work completed. The main focus is on free acceptance: Sumpter v Hedges (1898) 1 QB 673 CA C agreed to build two houses & stables for D. It was agreed that £565 would be payable on completion. C commenced performance & then ran out of money & was unable to complete. He had performed just over half of the contract. D completed the work himself. C sought to recover £333 representing the value of the work he had completed. He argued that in completing the work himself, D had thereby accepted partial performance & prevented C from completing the contract. C action failed. The court held that D had no choice but to accept partial performance as he was left with a half completed house on his land.Tender of performance Where a party is willing to perform & tries to tender performance but the other party does not accept the performance then the party seeking to tender performance is discharged from the contract & the non-accepting party is liable in damages for non-acceptance Startup v MacDonald (1843) 6 Mann & G 593 A contract stated that 10 tons of oil were to be delivered to D within the last 14 days of March. C delivered the oil at 8.30pm Saturday March 31st. D refused to accept the delivery because of the lateness of the hour. C had tendered performance within the agreed contractual period & was thus entitled to damages for non-acceptance.Performance prevented by the promisee Where the promisee prevents completion of the performance then the promisor is entitled to payment for the work which has been completed: Planche v Colburn  [1831] EWHC KB J56 KB C agreed to write a book on costume & armour for D as part of a series called 'the Juvenile Library'. Agreed contract price was £100 payable on completion. C commenced writing & had completed a great deal of it when D cancelled the series. D refused to pay C despite his undertaking & the fact that C was still willing to complete. C brought an action to enforce payment. C was entitled to recover £50 because D had prevented the performance.

Breach where there exists a breach of condition (as oppose to breach of warranty) this will enable the innocent party the right to repudiate the contract (bring the contract to an end) in addition to claiming damages. A contract cannot be discharged by a breach of

Anticipatory breach a party indicates their intention not to perform their contractual obligations, the innocent party is not obliged to wait for the breach to actually occur before they

bring their action for breach: Hochster v De la Tour (1853) 2 E & B 678 C agreed to be a courier for the D for 3 months starting on 1st June 1852. On the 11th May D wrote to C stating he no longer wanted his services & refused to pay compensation. C obtained a service contract elsewhere but this was not to start until 4th July. C brought an action on

warranty. 22nd May for breach of contract. D argued that there was no breach of contract on 22nd May as the contract was not due to start until 1st of June.  Where one party communicates their intention not to perform the contract, the innocent party need not wait until the breach has occurred before bringing their claim. They may sue immediately or they can choose to continue with the contract & wait for the breach to occur.This gives the innocent party the option to either sue immediately or continue with the contract themselves & wait for the breach to occur before bringing their action. This can be beneficial or risky: White & Carter (Councils) Ltd v McGregor [1961] UKHL 5 HL C supplied bins to the Local Authority & were allowed to display adverts on these bins. D owned a garage. D’s sales manager entered a contract with C for them to place adverts on the bins for a period of 3 years. The agreed price was payable by three annual instalments & if one of the payments was late the whole price became immediately due. D had not authorised the sales manager to enter the contract & phoned C on the same day as the contract had been made telling them that he did not want the advertising. C ignored D's communication & arranged for the advertising plates to be made up & placed on the bins. D refused to pay the first instalment & C submitted a bill for the full three years of advertising. C was not obliged to accept the breach of contract & could continue with the contract. They were thus entitled to full payment for the three years advertising.NB this case seems to ignore the general rule of the duty to mitigate loss applicable to claims for damages.Avery v Bowden (1856) 5 E & B 714 By contract C was to carry cargo for D. C arrived early to collect the cargo & D told them to sale on as they did not have any cargo for them to carry & would not have by the agreed date. C decided to wait around in the hope that D would be able to supply some cargo. However, before the date the cargo was supposed to be shipped the Crimean war broke out which meant the contract became frustrated. C therefore lost their right to sue for breach. Had they brought their action immediately they would have had a valid claim.